The Rationale: OpenWave’s Buyout of MusiWave

Ovum’s senior analyst Michele Mackenzie explains the acquisition: “Openwave is currently in the process of reviewing its strategy and overall market positioning in the technology market, and the acquisition of Musiwave indicates a significant shift in strategy. Openwave has traditionally focused on the provision of the technology that enables wireless content services, and its past acquisition strategy has reflected this. It acquired the location-based services software provider, SignalSoft, in 2002 and Magic4, a messaging software provider for mobile phones, in 2004. However, the acquisition of Musiwave represents an important move up the value chain to provide the next level of content and services on top of the technology platforms. This is a positive move for Openwave. Wireless operators, both large and small, are outsourcing numerous content services to trusted partners in order to reduce the costs of building and operating services in-house.
The strength that Musiwave brings to the equation is a solid track record of music provision with wireless operators (it was a first mover in this market) and an existing customer base, which Openwave needs to capitalise on. The company has developed a highly-specialised platform for the delivery of music, which it hosts and manages for its operator clients. In addition, it has well-established relationships with the music industry to negotiate rights and manage those partnerships.
But the content intermediary market is highly competitive. Some of Openwave’s big competitors – Ericsson, Nokia and Alcatel – have already launched hosted and managed content service offerings. For example, Ericsson has its M-Use service and Nokia launched Preminet in 2004, although these are not all focused on music, but include music as part of a wider offering. There are also many smaller players that have been consolidating to extend their geographic coverage. Openwave is a late mover in this space and will need to catch up fast. In addition, we believe that Musiwave’s revenues came largely from ringtones, an area where there is growing competition and decreasing margins. The challenge is to extend the offering to include more sophisticated music services and provide those services in a wider geography.”

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