Microsoft puts a price on Musiwave

Openwave Systems has agreed to let its Musiwave unit go to Microsoft for $46 million. After discussions last week, Microsoft also said will take on approximately $4 million in debt.

Openwave brought Musiwave two years ago for approximately $120 million. Musiwave provides mobile music entertainment services in 25 countries and does business with about 35 mobile telecommunications operators and handset manufacturers.

As reported in Telephony last week, the deal would give Microsoft its first presence in the mobile distribution space, creating a wireless complement to the PC-based music services it offers for its Zune music player today. An acquisition of Musiwave is also likely to fit into the new social music strategy Microsoft announced today.

Jonathan Arber, analyst at Ovum, said Microsoft is now active in the following areas for mobile: operating system, music, instant messaging, email, DRM, games, mobile search and more. Not all of these plays will succeed, he said, but with Google stepping further into this space with Android, and mobile device giant Nokia moving into the Internet services arena, it is right for Microsoft to keep on pushing hard to ensure it ends up the winner in at least some of them.

Arber also said the price tag on Musiwave is perhaps an indicator that growth in mobile music has not been as strong as players in this space had hoped. For example, the ringtone market, which is a key area for Musiwave, has been in decline.

“This will no doubt have had a knock-on effect on the company's fortunes, but being under Microsoft's umbrella should relieve any financial worries,” Arber said.

He added that Microsoft will likely integrate Musiwave into its current portfolio of mobile services.

“This deal should also allow Microsoft to further build on its relationships with the record labels, with whom it has built up relatively friendly relationships compared to key competitor Apple,” he said. “Now that it has a solid mobile platform, it can continue to drive integration between fixed and mobile music services, this time from the mobile platform side.”