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Rio owner quits MP3 player market

Not profitable enough, says D&M

Rio owner D&M Holdings is to quit the mass-market portable music player market, the company said on Friday.

The announcement comes as no surprise given that it sold its Rio division's technology and people assets to SigmaTel in July.

At the time, D&M said it was still "examining additional strategic options for Rio", but reports last week revealed that none of them stand up to scrutiny.

Japan-based D&M, which also owns the Denon and Marantz hi-fi brands, has been trying to stem losses at Rio for some time. Rio - originally part of Diamond Multimedia - was a pioneer in digital music hardware. But its Flash-based products were quickly out-evolved by hard disk-based units from a number of rivals, most notably Apple.

Being passed from corporate owner to corporate owner to corporate owner didn't help either.

Diamond Multimedia merged with S3 Graphics in 1999. S3 sold off the graphics chip business to Taiwan's VIA, effectively becoming Diamond Multimedia again in all but name. In 2000, it named itself 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 America, part of D&M, in April of that year.

The Rio product line was revitalised under Digital Networks, but despite winning reviewer plaudits, it failed to win significant customer numbers - it had simply lost too much brand equity to the iPod, iRiver and Creative's Zen line.

During its most recently completed financial quarter, Q1 FY2005, which ended 30 June 2005, D&M reported an operating loss ¥1.04bn ($9.41m), to which the Rio division contributed an operating loss of ¥0.96bn ($8.68m) - more than 92 per cent of the total. D&M reported a net loss of ¥717m ($6.48m) for the quarter.

There's still hope for the brand, perhaps. D&M said it was retaining the Rio name, and has a licence to use the MP3 technology now sold to SigmaTel. However, if the name is to be revived, it will almost certainly be pitched at the high end, as are D&M's other brands - now joined by speaker maker Boston Acoustics. ®

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