Shareholders of the Seattle, Wash.-based Loudeye will receive $4.50 for each share of the company stock.

The deal, expected to close by the end of 2006, is subject to a number of factors, including stockholder approval and Loudeye retaining its employees, customers and cash, according to a statement from the companies.

Aside from becoming part of Nokia, "it will be business as usual" for the music distributor, according to a Loudeye spokesperson.

"Music has become a key experience for Nokia and Nokia Nseries multimedia computers, and we want to be able to offer the best fully integrated mobile music experience to our customers," Anssi Vanjoki, Nokia's executive vice president and general manager for multimedia, said in a statement.

The acquisition is Nokia's attempt to break out of a hardware-only mold, Mike Goodman, Yankee Group analyst, told internetnews.com

"They are trying to be a lifestyle company."

Vonjoki said people should be able to listen to all the music they want, anywhere and anytime and at a reasonable price.

The Loudeye acquisition will make it possible to deliver that vision to Nokia customers in 2007, according to the cell phone executive.

Integrating Loudeye's services will allow Nokia to compete with Apple and Microsoft.

While Microsoft has announced its Zune iPod-like device, "Apple is the only company out there with a truly integrated service," Goodman said.

The purchase of Loudeye makes Nokia the only integrated music service for phones.

Loudeye, which already performs some back-office services for Nokia, will likely be optimized for Nokia's Nseries, according to the analyst.

Nokia has sold over 5-million Nseries smartphones since introducing them last year.

Canalys research reported in the spring 53 million multimedia phones shipped in 2005, with Nokia commanding more than 50 percent of them.

The Finnish phone-maker said the N70 was its highest revenue generator and the best-selling 3G handset period last year; accounting for 10 percent of all broadband phones sold around the world.

Nokia' first multi-gigabyite music phone, the N91, which started shippping in Europe a few months back, finally launched online in the U.S. in June. The 4 GB smartphone sells for $599.

The N91's steel-chassis holds up to 3,000 songs, according to Nokia. There's a 3.5 mm stereo jack for headphones right on the phone, so there's no need for dongles, and it bundles a headset and remote control.

It also has dedicated keys for its audio player functions, which support the MP3, M4A, WMA, AAC, AAC+ and eAAC+ music formats. An industry standard mini USB 2.0 port should make transferring files fast and easy. There's also Wi-Fi, Bluetooth and 3G connectivity.

Loudeye, which powers online music stores, including MSN and MTV, boasts 60 services in more than 20 countries offering 1.6 million songs.

Loudeye CEO and president Michael Brochu said today's agreement is a recognition of the company's "key role" in the digital music market.

The announcement comes a day before Loudeye is scheduled to announce its second-quarter results.

The digital media distributor reported a $4.6 million loss for the first quarter of 2006. Digital media store services account for 76 percent of Loudeye's revenue.

In May, Loudeye sold its U.S. operations for $11 million to Muze, a New York-based entertainment services company.

In another move to link phones to music services, Verizon Wireless unveiled its Chocolate handset, described as an MP3 player with some cell phone functionality thrown in for good measure.

As previously reported, the carrier also dropped subscription fees to its V-Cast download service, opting for a more iTunes payment model.

Story Courtesy of internetnews

James Alan Miller contributed to this article.