Is HP Taking on Apple with nuTsie Deal?


This week computer giant Hewlett-Packard announced the purchase of Melodeo, which operates the music-streaming service called nuTsie. The terms of the deal were not disclosed.

According to a recent report from Morgan Stanley analyst Mary Meeker, the mobile Internet is ramping up faster than the desktop Internet did back in the 1990s -- and of course, Apple (AAPL) is leading the charge.

Apple's rivals are scrambling to deal with this disruptive change. In late April, Hewlett-Packard (HPQ) shelled out a hefty $1.2 billion to purchase struggling mobile device maker Palm. The upshot of the deal is that HP is now one of the few company's with a mobile operating system -- called webOS -- which is critical for success in the mobile Internet industry.

But there will also need to be further innovations to the platform, and this week's acquisition of nuTsie will certainly help. Interestingly enough, the company is similar to LaLa, which Apple purchased in late 2009.

Dot-com Pioneers

Melodeo got its start back in 2003. The founders of the company were dot-com pioneers, who sold Tegic to AOL (AOL) for $350 million. Tegic was one of the few products deployed on cell phones at the time.

But as mobile technology got stronger -- especially with the growth in smart phones -- there was certainly lots of opportunity for a next-generation company. And aren't mobile phones a natural fit for music? So, Melodeo developed nuTsie to allow people to transfer their iTunes library using their phones. All in all, it's an easy service and is compatible with the majority of mobile handsets on the market.

The problem is that the streaming music market is challenging, as seen with the recent struggles of Napster and Rhapsody. In other words, a buyout makes a lot of sense for Melodeo.

HP's Game Plan?

HP does have some strong mobile assets. For example, it has the iStream platform that streams digital media onto mobile devices. However, it is based on Microsoft (MSFT) technology.

But digital streaming is strategic for a mobile operating system. Besides Apple's purchase of LaLa, Google (GOOG) has also entered this segment with its purchase of Simplify Media. The result is that streaming will be a standard feature on the Android.

Can HP make a dent with its recent deals? It certainly has a chance. The computer company has a global brand and massive distribution. And it is willing to make the necessary investments to improve on the webOS platform.

Perhaps the biggest reason for success is that the mobile market is expected to grow at a rapid clip over the years, which will slowly eat into PC sales. HP really has no choice but to get aggressive with its mobile strategy.