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Contributors: Douglas McIntyre Jon C. Ogg

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Tuesday, August 08, 2006

Implications of Nokia Acquiring Loudeye

Stock Tickers: LOUD, NOK, ADBL, OPWV, DMGI

If you forgot all about a little mobile online music distribution technology company called Loudeye (LOUD), you aren't alone. Yesterday the market caps was a mere $23.4 million and it's stock was only $1.77. The yearly trading range had been $1.56 to $11.40.

This morning Nokia (NOK) announced it would pay $60 million to acquire the company, which translates to $4.50 per share.

Loudeye provides digital media services that facilitate the distribution, promotion, and sale of digital media content for media and entertainment, mobile communications, consumer products, consumer electronics retail, and ISP customers worldwide. Its services include turn-key, outsourced digital media distribution and promotional services, such as private-labeled digital media store services, including mobile music services; and digital media content services, such as encoding, music samples services, hosting, and Web casting, as well as Internet radio services. The company’s digital media store services include hosting, publishing, and managing digital media content, and delivering such content to end-consumers on behalf of its customers; and digital rights management and licensing, usage reporting, digital content royalty settlement, customer support, and publishing-related services. Loudeye was founded in 1997 and is headquartered in Seattle, Washington.

What are the implications over distribution systems now? This deal has to make some think that other content distribution companies may be more attractive.

Openwave (OPWV) is involved in many aspects of this arena, but on more of a back-end basis and is much more complicated. It also has many operations and is more of a provider to cell phone carriers than anything else. Its market cap is $633M and its stock went in the toilet mid-year. OPWV was a name that was on the watch list for a BAIT SHOP addition, but it hasn't met all the criteria yet; and the "who would be the natural acquirer?" issue is the biggest hurdle there.

Audible (ADBL) is an online content distribution center for audio books, audio versions of magazines and newspapers, and podcasts. ADBL closed yesterday at $7.46, and has a $7.25 to $15.29 52-week trading range. Its market cap is $183 million.

Another name that comes to mind is Digital Music Group Inc. (DMGI). provides digital music recordings to online music stores. It purchases, licenses, or distributes music recordings in digital format from record labels, artists, and other content owners; and processes these recordings through its digital music processing system for delivery to online music stores. The company, through online music stores, offers consumers with access to music recordings, which are not readily accessible in music retailers or available in digital format. The company distributes approximately 65,000 digital music recordings primarily to major online music stores and to selected specialty online music stores that offer its music recordings for sale to consumers. DMGI is not profitable, its shares were $5.77 yesterdat, and its 52-week trading range is $4.60 to $10.42. Its market cap is also tiny at $49.7 million.

Jon C. Ogg
August 8, 2006

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