Under the terms of the deal, Nokia said that Loudeye stockholders will receive $4.50 per share in cash for each share of Loudeye common stock. Nokia said the Loudeye acquisition would allow it to offer consumers a comprehensive mobile music experience, including devices, applications and the ability to purchase digital music.
During the last quarter, the Espoo, Finland-based company claims to have sold more than 15 million music-enabled phones, making it the world’s largest manufacturer of digital music players. During the same period, Apple reported a 32% rise in iPod sales, with 8.1 million iPods shipped from April to June.
Nokia’s claim is somewhat disingenuous, as many of its mobile phones include music players, while Apple is not in the mobile phone market, unless you count its relationship with Motorola and its poorly received Rokr phone, which featured an iTunes client.
Indeed, it was only four months ago when Nokia started shipping its first music-optimized handsets. It is more likely that Nokia has viewed the strong success of the Walkman-branded phones of rival Sony Ericsson Mobile Communications.
The deal gives Nokia the ability to provide a music download service under its own brand name sometime in 2007. However, this means that Nokia is likely to run into direct competition with its own operator customers, who offer their own music download services.
Yet, under the leadership of new chief executive, Olli-Pekka Kallasvuo, Nokia is starting to become a much more aggressive beast and has not been shy of making some tough calls. Under his tenture, Mr Kallasvuo has scrapped plans to merge its CDMA handset business with Sanyo Electric Co, and has agreed to spin off its mobile networks infrastructure unit.
Seattle, Washington-based Loudeye, meanwhile, posted a net loss of $25.6 million on sales of $27 million in 2005. While, financially, Loudeye is a bit of a mess, its value is in the deals it has with most of the major record companies. Indeed, it offers licensed catalog and complete media for over 1.5 million tracks. Loudeye claims to be number one supplier across Europe of white label music platforms and business-to-business digital media distribution services. What this means is that Loudeye essentially provides a music distribution engine that is then branded by third parties that want to set up their own online music store.
For Nokia, the deal means that it can aggressively promote its music-playing handsets. As most handsets shipped now feature some form of camera, digital music is being increasingly viewed as a key driver for the next generation of handsets.
