Roxio Pouring All into Napster

Received wisdom has it that putting all your eggs in one basket isn't a good business plan, but that's exactly what Roxio, Inc. intends to do with its Napster online music service.

On August 9, Santa Clara, CA–based Roxio announced the sale of its software division to Sonic Solutions of Novato, CA for $80 million. The deal will divest Roxio of its popular CD and DVD recording, authoring, and photo and video editing application products including Easy Media Creator, PhotoSuite, VideoWave, Easy DVD Copy, and Toast.

Terms of the transaction provide Roxio with $70 million in cash and shares of Sonic common stock valued at $10 million. The money will be pumped into Roxio's Napster online music service, one that company officials believe is poised for tremendous growth as downloadable music moves into mainstream commerce. "With the successful completion of the transaction, Napster will emerge as a well-positioned pure-play in the fast-growing digital music sector, with a substantially enhanced balance sheet that will support our growth plans," said Roxio chairman and CEO Chris Gorog. The Roxio name will officially morph to Napster after the software sale to Sonic Solutions is completed, sometime in the fourth quarter of 2004.

Roxio's software titles will fill out Sonic Solution's roster of professional and consumer products, which already include My DVD and the Sonic Dolby Digital AC-3 Encoder for MIPS Technologies' new consumer audio platform, announced June 16. "The first software component designed specifically for microprocessors based on the industry-standard 'MIPS32' architecture, Sonic's AC-3 Encoder dramatically cuts chip design cycles by providing MIPS licensees with a high-quality Dolby Digital stereo encoder that can be quickly and easily integrated into microprocessors for consumer electronics products," states a press release on the Sonic Solutions website.

Sonic Solutions made its name in the pro audio world a decade ago, producing some of the most well-regarded early-generation digital workstations. That end of the business is now run as an independent enterprise by a group of former Sonic Solutions employees known as Sonic Studio LLC. Sonic intends to continue Roxio's brands, current distribution, and OEM relationships, as well as retaining most of the current employees of the Roxio organization, according to the announcement.

News of the sale was well received by the investment community, pushing Roxio's stock up 7.49% to $4.45/share in after-hours trades, according to an August 9 report by Peter Cohen of MacCentral.com.

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