Flash memory developer SanDisk Corp. revealed plans to acquire MusicGremlin Inc., the creator of a wireless digital music player and companion subscription service, for an undisclosed amount. The five-year-old New York-based startup took in two rounds of venture funding worth more than $5 million, with Allen & Co. leading its Series B round in February 2005.
The deal could represent an entry into the services marketplace for a company previously associated with hardware. SanDisk, whose Sansa MP3 players compete most directly with Apple Inc.'s flash-based iPod models, will apparently add elements of MusicGremlin's digital distribution platform to its products, according to a company statement. MusicGremlin introduced an MP3 player in 2006 that communicates via Wi-Fi, allowing users to subscribe to a central library of music for a monthly flat fee of $15. Users can also share songs with each other via wireless connections.
The acquisition is one of many for SanDisk over the past few years. It paid $1.5 billion in stock to acquire Israeli flash specialist Msystems Ltd. in 2006, $250 million for chipmaker Matrix Semiconductor Inc. in 2005 and an undisclosed amount for flash content distribution technology developer MDRM in 2004. SanDisk, which also creates image storage media, hired key dealmaker Jim Brelsford last fall.
Meanwhile, SanDisk CEO Eli Harari says flash memory cards preloaded with music could replace CDs as the dominant physical media form for music sales, offering portability and the convenience of being plugged into any device. He even mentions adding a subscription service that would somehow be compatible with such cards, although he doesn't offer details of how that might work. - Paul Bonanos
Read June 10 press release on MusicGremlin deal from SanDisk
See May 2006 post on SanDisk's acquisition of Msystems
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