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Nokia to buy Loudeye for $60 mln, taking on Apple

Nokia Oyj, the world's largest maker of mobile phones, agreed to buy Loudeye Corp. for $60 million to challenge Apple Computer Inc.'s iPod in the market for music downloads. Loudeye shares more than doubled. Shareholders of Seattle-based Loudeye will get $4.50 a share, Nokia said in an e-mailed release today. That's more than double the closing price of $1.77 in US. Nokia is taking on Apple's iPod music player by making it easier for mobile-phone users to download and listen to music. Loudeye runs 60 live music services in more than 20 countries, where it offers more than 1.6 million tracks. Espoo, Finland-based Nokia is trying to spur demand for more advanced mobile phones as prices decline and subscriber growth slows in saturated markets. „Apple was the early one to make a move on music,” said Jussi Hyoety, an analyst at FIM Securities in Helsinki with „buy” rating on Nokia's stock. „Still, that train hasn't left the station yet. This is a natural move forward for Nokia.” Loudeye operates mainly in Europe, South Africa, Australia and New Zealand, employs about 130 people and had 2005 sales of $20.3 million, excluding discontinued operations, Nokia said. Loudeye shares, which had declined 53% this year before Tuesday, rose as much as $2.65 to $4.42 and traded at $4.34 as of 11:42 a.m. in New York. Shares of Nokia rose 4 cents, or 0.3%, to end trading at € 15.19 in Helsinki. Apple’s shares have come under pressure this year amid concerns that a lack of new models could hit iPod sales, which account for about 40% of the company’s revenues. Loudeye has a current library of 1.6m music tracks. Investors have been awaiting updates to Apple’s iPod music player line, which was last refreshed in February when the company unveiled a 1 gigabyte iPod nano.
„Music is one of our basic needs,” said Hyoety at FIM Securities. „Music on mobile phones will grow. It's just a matter of making the service better.” Nokia last year started co-operating with Loudeye to offer a service that lets phone companies provide music to subscribers, with the fee appearing on the user's phone bill. Songs from the service can also be downloaded to personal computers that use Microsoft Corp. software. „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 the release. The new service will allow consumers to purchase music from an individually branded internet site, download it to their mobile phone and pay for it on their phone bill.

Cupertino, California-based Apple has used its iPod player to broaden revenue beyond Macintosh computers. Apple has sold about 59 million iPods since their introduction in October 2001 and sells music to iPod users through its iTunes online stores. Nokia last quarter sold 78.4 million mobile phones, including more than 15 million handsets with a music player.
Nokia's „comprehensive music experience to Nokia device owners” will start in 2007, the company said in the release. Nokia is also trying to stay ahead of Motorola Inc., the second-biggest handset maker. Motorola has persuaded Apple to allow downloading of songs from Apple's music service onto its mobile phones. Growth in global mobile-phone shipments will probably slow to 11% in the second half from 16% in the first half, Nomura International Ltd. predicts. That's down from last year's growth of 24%. Nokia expects to complete the purchase in the fourth quarter of 2006. (Bloomberg,