Rock on, Microsoft
The world's largest software company announced this morning it intends to acquire Openwave's
Ho hum. Terms aren't being disclosed, but the price will likely amount to pocket change for Microsoft. It's a far cry from the beefier acquisitions that I felt Microsoft should target.
Why am I so unimpressed with this deal? A little history.
Openwave originally paid $121 million in cash and stock for Paris-based Musiwave in 2005. It seemed like a good idea at the time. Openwave, a major player in mobile browser software, wanted to expand, so it snapped up digital music specialist Musiwave.
Music and wireless are a great match. Consumers are willing to pay more for a ringtone snippet than they do for an entire digital download. Openwave had the technology; Musiwave had established relationships with the major record labels. What could go wrong?
Everything, actually. The deal was supposed to be accretive to Openwave's bottom line in calendar 2006. It was not. Losses began to mount at Musiwave. It got so bad that Openwave threw in the towel on Musiwave long before Microsoft was willing to catch it on the other end.
Musiwave has been listed as a "held-for-sale" discontinued operation in Openwave's last few quarterly income statements. The only real surprise was that someone was willing to take it on. If Microsoft is paying anything less than pennies on Openwave's bloodied dollar for Musiwave, consider it a huge victory for Openwave.
Wait a minute. Don't Openwave and Microsoft compete in the mobile software space? Yes, but now that Google
From the start, wireless music has been a tough sell. A fallen dot-com search darling like InfoSpace
Microsoft is buying little more than clammy handshakes here. Good luck on your next gnaw, Mr. Softy.
Microsoft is an Inside Value recommendation. Openwave is a pick in the Rule Breakers growth stock research service. Both newsletters are currently beating the market, and you can find out why with free, 30-day trial subscriptions.
Longtime Fool contributor Rick Munarriz isn't a fan of falsetto unless it's Mika or The Bee Gees. He does not own shares in any company in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
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