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SigmaTel snaps up Rio MP3 technology, engineers

Digital music pioneer now no more than a name

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Rio, the erstwhile giant of the portable MP3 player market, is to become little more than a name after current owner D&M Holdings admitted yesterday its has sold the loss-making division's intellectual property, and technology and engineering resources to MP3 chip maker SigmaTel.

The financial terms underpinning the deal were not disclosed, but D&M described it as an "attractive offer" which will, in part, yield an exeptional item of $7m to D&M's Q2 FY2005 results.

D&M - which is best known for its Denon and Marantz hi-fi brands - has been trying to reduce the money its Rio division was losing for some time. The deal allows it to focus its product development efforts on the user-level elements, relying on SigmaTel to handle the core technologies. Because of its size and focus, SigmaTel is better able to deal with the cost of developing those technologies than Rio is.

SigmaTel was already supplying device controller chips to Rio. It provides similar products to other companies, such as Samsung and Creative, and so they too will be able to benefit from the technology SigmaTel has acquired. But since D&M has been granted a "no-fee, grant-back" licence, presumably they will pay more for products containing Rio-derived technology than D&M will - provided it continues to buy SigmaTel chips, of course.

D&M said it was still "examining additional strategic options for Rio".

Rio was originally an off-shoot of Diamond Multimedia, which in 1999 merged with S3 Graphics. S3 sold off the graphics chip business to Taiwan's VIA, so it effectively became Diamond Multimedia again in all but name. In 2000, it became SonicBlue and went on to acquire TiVo rival ReplayTV. It was eventually sued by the TV industry for incorporating ad-zapping technology, which ultimately led, in 2003, to a Chapter 11 filing. Rio and ReplayTV were sold to Digital Networks, part of D&M, in April of that year.

During its short life, SonicBlue also acquired our old chums at UK in-car Linux-based MP3 hardware developer Empeg, who went on to become Rio's audio software team. Presumably, they too will now become SigmaTel employees. ®

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