SanDisk is expanding its reach into the MP3 player market through the acquisition of WiFi music service/device MusicGremlin.

MusicGremlin is a hybrid digital music device and service that lets users browse, buy and download music wirelessly from various WiFi hotspots. The company was one of the first to offer a wireless digital music service, but it never took off among consumers in the wake of more popular devices like the iPod Touch, which came later.

The value of acquiring music wirelessly is as yet unclear. Whether done via WiFi networks or from cellular networks run by wireless operators, very little music is accessed directly from a portable device. Most fans still prefer to either download from their PC or rip their CDs, and then transfer the music to their devices.

But the MusicGremlin acquisition shows that SanDisk believes it remains a potential opportunity. SanDisk created a custom WiFi-accessible music player for the now-defunct Yahoo Music Unlimited service, but that was its only foray into the market.

Details of the acquisition were not disclosed. SanDisk will integrate the MusicGremlin service into its Sansa division, which creates the Sansa line of MP3 players. Robert Khedouri, co-CEO and co-founder of MusicGremlin, will join the team as VP of services.