Tech Stock News And Analysis

Last Trade:	16.60
Trade Time:	3:52PM ET
Change:	2.63 (18.83%)

Shares of WiderThan rose $2.66, or 19 percent, to $16.63 in premarket trading after closing at $13.97 Tuesday on the Nasdaq. The stock has traded between $8.66 to $19.20 and is down about 8 percent from the beginning of the year.

Seattle-based RealNetworks, which is known for its music player and Rhapsody music service, said Tuesday it will acquire WiderThan for $350 million, or $17.05 per share. The deal should close in the first three months of next year.

WiderThan provides "ringback tones," which is music that plays when a person places a call, to more than 50 wireless carriers in 25 countries.

Steven B. Frankel in a client note said WiderThan complements RealNetworks' technology segment, which provides server software to carriers and outsourced streaming services.

"Strategically, we believe this transaction significantly improves the company's position in the wireless market, adding leading market share in ringback tones, an entry into the Asian market and broader Tier 1 customer relationships in the US," the analyst wrote. "For WiderThan, Real Networks lets the company reach beyond the handset to the Internet and broaden beyond music into video and gaming."

Frankel believes carriers will increasingly turn to third-party providers like RealNetworks for video, music and ringback services.

The deal should boost 2007 earnings by possibly 3 cents per share to 4 cents per share on about $150 million in revenue, the analyst wrote.

Difficulties in integration could include maintaining WiderThan's business relationships, successfully selling the unit's products in Europe and combining WiderThan's products with RealNetworks' video and gaming products, wrote Frankel.

But the field could mark a new leg of growth for RealNetworks. The analyst reiterated a "Buy" rating on shares, though he expects "typical investor skittishness related to acquisitions" could drive RealNetworks shares down in the short-term.