Microsoft Announces Planned Purchase of Musiwave

[Sunite]

Microsoft Announces Planned Purchase of Musiwave
By Frederick Lane
November 13, 2007 12:29PM

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Despite reservations about Musiwave's success so far, analysts see a bright future for wireless music downloads in general. Microsoft's press release indicating that it is considering the acquisition of Musiwave cited a study from Ovum that predicts that more than a billion music-capable phones will be shipped in 2010.

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   Can software giant Microsoft Relevant Products/Services eat into Apple's enormous lead in the wireless Relevant Products/Services music market? The Redmond, Washington-based company hopes the answer is a resounding "Oui!"

On Monday, Microsoft announced that it had entered into an exclusivity agreement to acquire Musiwave SA, a Paris-based provider of "mobile music entertainment services." According to a Microsoft press release, Musiwave is a leading provider of "white label music solutions" to mobile operators, ranging from complete song downloads to ringtones. No financial terms of the proposed deal were disclosed.

"Microsoft and Musiwave share the same philosophy in working with hardware and mobile operator partners to deliver great experiences for mobile device users," said Pieter Knook, senior vice president of the Mobile Communications Business at Microsoft.

"Bringing Musiwave on board would provide an opportunity for Microsoft to explore new areas in the mobile space previously untapped, and to showcase the power of software plus services," he added. "This contemplated acquisition reflects Microsoft's recognition of the software and technology expertise in Europe."

Bargain or Objet Superflu?

"If I were gambling," Tim Gideon, the lead audio and video analyst for PC Magazine, said in an e-mail, "I'd put my money on Microsoft trying to pave the way for their Zune Marketplace to eventually have a wireless download option, and this is perhaps a first step towards that technology."

Just two years ago, Musiwave was purchased by Openwave for $121 million in cash and stock. Despite high hopes for strong earnings, however, Openwave never saw the return on investment that it expected, and according to Motley Fool contributor Rick Munarriz, Musiwave has been listed as a "discontinued" operation on Openwave's last few quarterly statements.

"Musivave will come cheap," Munarriz said by e-mail, "so at least it's not throwing a ton of money down a hole. The key here is if Microsoft has ideas in mind to use the relationships and technologies for new products that will be profitable."

If the strategy works, he said, Microsoft will get plenty of bang for its buck. "However, putting more of the pieces together, an InfoSpace would have been a better strategic fit along all of Microsoft's jagged puzzle pieces (in wireless and search)," he added.

A Bright Wireless Music Future?

Despite the reservations about Musiwave's success so far, both analysts see a bright future for wireless music downloads in general. Certainly, the projected growth in the mobile music market is remarkable: Microsoft's press release cited a study from the technology research firm Ovum that predicts that more than a billion music-capable phones will be shipped in 2010.

Gideon agreed that there is a large potential market. "Wireless downloading is the wave of the future, for sure. Currently, wired downloading is faster, but more and more homes are setting up wireless networks and it only makes sense, if you've already eliminated the cable from PC to Internet source, that you'd also eliminate the cable from MP3 player to PC."

Munarriz suggested that Apple might be on the verge of creating a successful wireless music market. "Once folks with their iPhones are ordering songs playing as they're sipping down their double lattes inside a Starbucks," Munarriz said, "expectations of digital delivery may change. It is important for Microsoft to be there, especially if the Zune will still be around by then."