Has hired investment banking firm UBS.

Napster has put itself up for possible sale in response to what it claims is "recent third party interest in establishing strategic partnerships or potentially acquiring the company."

The Los Angeles-based digital music subscription and download retailer, which has a market capitalization of $183 million, has hired investment banking firm UBS to explore its "strategic alternatives." No timetable has been set for when the company might do a deal. Napster warned that the review process may not result in a transaction.

Napster Chairman/CEO Chris Gorog said that it is "in a strong position to continue aggressively building our business as an independent company" and that the goal of a sale or partnership is to enhance shareholder value.

For its fiscal year ended March 31, Napster reported revenues of $97 million-a 103% increase over 2005. Meanwhile its annual net loss almost doubled to $54.9 million during the same period. In the previous year it posted a net loss of $29.5 million.

As of its fiscal first quarter ended June 30, Napster's total paid subscriber base was 512,000, including 4,000 university subscribers. At the end of March 31, Napster's total paid subscriber base was 606,000, including 59,000 university subscribers. Napster posts low university subscriber numbers over the summer months. Excluding university numbers Napster subscriptions were down 7% quarter over quarter. The company attributed the decline to the impact of its advertising-supported Napster.com strategy. The company expects to see improved customer conversions from the try-before-you-buy destination in the second half of its fiscal year. Napster ended the first quarter with a total of $97.8 million of cash, cash equivalents and short-term investments.

According to data from research firm NPD, Napster currently ranks fourth in digital music market share trailing Apple Computer's iTunes, Dimensional Associates' eMusic, and Real Networks' Rhapsody.

Napster stock closed down 6 cents at $3.55 ahead of the news. The company's shares are off 30% from a 52 week high of $5.10.

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