UPDATE: Investors Eye iPhone Start-Upgrades

SAN FRANCISCO -(Dow Jones)- Shape Services GmbH, a German cell-phone software vendor, is buying a leading supplier of games and other new features for Apple Inc.'s (AAPL) iPhone.

"The step will make our positioning in the iPhone software market stronger," Shape Services' Chief Executive Igor Berezovsky wrote in an email to Dow Jones Newswires.

The deal for New York-based iPhone Applications List highlights how investors are now eyeing iPhone-related businesses created in the three months since Apple's combination cell phone, media player and Web surfing device first went on sale.

The acquisition also illustrates the lucrative potential of the growing number of companies now making iPhone paraphernalia, said Greg Sterling, founding principal of Sterling Marketing.

Under the right conditions, the iPhone's ecosystem of third-party companies and software developers could equal the one surrounding Apple's iPod lineup of media players, Sterling said. There's an estimated $1 billion in sales annually of iPod add-ons.

"The iPhone could generate that same kind of ecosystem, and as part of that, you'll see more merger and acquisition activity," Sterling said.

There's anecdotal evidence suggesting the investment community's interest in iPhone-related companies is relatively strong now. iPhone Application List founder Steve Schopp said Shape, based in Stuttgart, Germany, was one of three potential buyers that approached him.

Schopp settled on Shape because, he said, he could continue to operate the business, which offers access to more than 350 iPhone features through the device's Web browser. The main Web site gets about 20,000 visits a day, Schopp said.

Shape is an eight-year-old company largely known for its IM+ product lineup, which allows for using the top five instant messengers from one single cell- phone interface.

The company, which couldn't be reached for comment, recently released products for the iPhone.