Microsoft is adding a bulwark to its mobile-music strategy as it gets ready for the coming rumble with Apple and Google.
The Redmond, Washington, company, which posted fiscal 2007 revenue of $51.1 billion, Thursday said it will acquire Musiwave, a subsidiary of Openwave, for $46 million in cash plus the assumption of $4 million in debt.
For Microsoft, the deal extends its music delivery capabilities to Leap Wireless, Orange UK, and T-Mobile, carriers for which Musiwave has built private-label digital music stores. The acquisition also gives Microsoft another cudgel to use against its rivals.
“It would be part and parcel of a platform directly targeting the iPhone,” said analyst Rob Enderle, referring to Apple’s ground-breaking smartphone. “Apple’s exposure has always been that they lack a subscription service and they’re proprietary.” By contrast, Microsoft’s platform “allows others to build a common multimedia phone.” Also racing for a share of the wireless multimedia market is Google, which hopes to extend its search and advertising franchise to cell phones through its recently announced Open Handset Alliance.
The stakes for all are high. “The cell phone is the next big market, and it will probably eclipse desktops,” Mr. Enderle said.
In a sense, Mr. Enderle said, Microsoft and Apple are trying to extend their business models to the wireless realm. Apple’s integrated approach to hardware and software creates a more effortless experience for the consumer in its computer products and in its marriage of the iPod music player and the iTunes store. Meanwhile, Microsoft’s model of creating an operating system and allowing hardware vendors to compete, drives down prices.
“Google’s probably the dark horse,” Mr. Enderle said. “They come to the market with a model that’s different from anyone else. Their model can be subsidized by advertising.” Google’s alliance plans to create a platform dubbed Android for smart phones that will include a Linux-based operating system and basic software programs.
Openwave, based in Redwood City, California, makes a mobile browser and infrastructure software that lets wireless carriers provide data services. The company acquired Paris-based Musiwave for $117 million plus performance incentives in January 2006.