Microsoft, in its latest bid to topple Apple as the king of the digital music hill, is rolling out a new line of its Zune portable music players Tuesday and negotiating to acquire Musiwave, which operates the music download stores for mobile operators Orange UK, T-Mobile, and Leap Wireless.
In a statement, issued Monday, Microsoft said it is holding exclusive talks to acquire Musiwave, a unit of mobile phone operating system provider Openwave.
The announcement triggered speculation that Microsoft plans to extend the mobile services of its Zune Marketplace, a music store designed to rival Apple’s iTunes, which sits at the center of its end-to-end hardware and software service. In the news release, Pieter Knook, senior vice president of mobile communications at Microsoft, said the acquisition would let the company explore “untapped” areas and bring it “key assets,” combining Musiwave’s relationships with music labels, device makers, and mobile operators with its own Zune devices and Windows Mobile operating system.
Though Paris-based Musiwave was acquired for $117 million plus performance incentives by Openwave in January 2006, Robert Stimson, an analyst at WR Hambrecht & Co., said Microsoft will buy it for a fraction of that price. In Monday afternoon trading, Openwave shares were down $.06, or 1.87 percent, to $3.28. The entire company had a market capitalization of $273 million.
“They did not sell it for a big number,” he said.
On Tuesday, Microsoft will be launching new 80GB, 8GB and 4GB versions of the Zune as well as an updated version of the Zune Marketplace and Zune Social online music community. Owners of the new Zunes will be able to set them to sync to the music on their PCs with a Wi-Fi connection. The new Zunes will continue to let users share songs with other users, who can listen to them up to three times on their Zunes.
The new Zune Marketplace will have more than three million songs, including MP3s free of digital rights management restrictions. In September, retailer Amazon opened an online music store offering tracks free of DRM restriction. Within weeks, Apple responded by cutting the price of its DRM-free iTunes downloads.
In January 2007, the iPod had 72.7 percent of the market for music players sold through retail, according to the NPD Group. Apple was followed by Sandisk at 8.9 percent and Microsoft at 3.2 percent.
Microsoft and Openwave did not respond by deadline to requests for comment.