Microsoft to buy mobile music company Musiwave

Microsoft plans to buy mobile music service provider Musiwave, as the software giant looks to step up its consumer mobile offerings.

Musiwave allows mobile operators to offer self-branded music applications, including full song-over-the-air downloads, ringtones and ring-back tones. Operators including O2, Vodafone, T-Mobile, Orange, Telus, Telefonica and Virgin Mobile are among Musiwave's customers.

Microsoft said that it has signed an exclusivity agreement regarding its intention to acquire Musiwave. The companies did not disclose any financial details of their discussions. Microsoft would acquire Musiwave from Openwave, which bought the company in 2005 for more than US$121 million. At the time, Openwave said it expected that Musiwave would add more than US$50 million to its revenue for the calendar year 2006.

Microsoft said the acquisition would bring together Musiwave's relationships with music labels, device makers and operators with Microsoft products and services including Windows Mobile, Zune, MSN and Windows Live. In its announcement about the deal, Microsoft touted Musiwave's support of phones from different manufacturers running a variety of software, indicating that the software giant could decide to continue supporting non-Windows Mobile phones with Musiwave services.

With Musiwave, Microsoft would compete with other existing mobile music services, most notably the iPhone combined with iTunes. "They're probably looking at the success of the iPhone and are concerned that it could build into something," said Matt Rosoff, an analyst at Directions on Microsoft. "If [the iPhone] doesn't cut into Windows Mobile sales, it could stall growth."

In addition to the iPhone, other mobile phone makers have music services. Nokia recently opened a mobile music store available to customers in the U.K. Samsung also introduced a mobile music store with MusicNet, a company providing white label music services.

Going to market with a company like Musiwave supports Microsoft's mobile strategy because Musiwave allows operators to offer self-branded services. Microsoft has typically partnered with operators and handset makers, rather than trying to offer services that could compete with them, said Rosoff.

Buying a mobile music company is clearly a departure from Microsoft's typical business user-focused strategy with Windows Mobile, however. But as far back as two years ago the company signaled its intention of trying to appeal more to the consumer market, when it moved the Windows Mobile group into the larger consumer-focused group at Microsoft that includes Xbox and Zune, Rosoff noted.

If the deal goes through, Musiwave would continue to be based in its current Paris headquarters, Microsoft said.

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