Nokia said on Tuesday it had agreed to buy U.S.-based digital music distributor Loudeye for $60 million as the world's largest handset maker aims for a bigger slice of a potentially lucrative market. Nokia said it had offered $4.50 per share in cash to Loudeye shareholders, 2.5 times Loudeye's closing price of $1.77 on Monday.
"We see the acquisition price as reasonable," Nokia's spokesman Kari Tuutti told Reuters. "Loudeye has extensive know-how in the music industry."
Nokia has stepped up a gear on the acquisition trail after its new chief executive, Olli-Pekka Kallasvuo, took over in June. It has agreed to spin off its mobile networks infrastructure unit and dropped a planned phone making venture with Sanyo.
Kallasvuo has said Nokia is set to strengthen its multimedia and enterprise units through acquisitions.
Handset makers see digital music as one of the key drivers for selling more expensive new phones.
"Music is now the number one service for selling advanced mobile phones--it has been cameras, and in the future it might be television--but in 2006 music has become the service phone makers have been concentrating on," said FIM Securities analyst Erik Sucksdorff.
Loudeye operates 60 live services in more than 20 countries across Europe and South Africa, Australia and New Zealand.
"This is an entry to a new business for us, so far Nokia has sold mostly devices," said Nokia's Tuutti.
Loudeye aggregates rights and content from major labels and hundreds of independent labels and currently offers licensed catalog and complete media for over 1.6 million tracks.
"Loudeye has a good business concept and well-working distribution network. Nokia gets established relationships to content producers and a digital music platform," said FIM's Sucksdorff.
Nokia said it had sold more than 15 million music-enabled phones in April to June, making it the world's largest manufacturer of digital music players, and it aims to sell more than 80 million music devices this year.
"Nokia must see this as a very important acquisition ... it's the future expectations that Nokia is buying," said eQ analyst Jari Honko. "It can be a very important addition to the multimedia unit."
The deal with Loudeye, which reported 2005 revenue of $27 million and loss from continuing operations of $25.6 million, is is expected to be completed in the fourth quarter of 2006, Nokia said.
"By acquiring Loudeye, Nokia can offer consumers a comprehensive mobile music experience, including devices, applications and the ability to purchase digital music," Nokia said in a statement.
