Electronics Giant Best Buy Acquiring Napster For $121 Million

(AHN) - Consumer electronics giant Best Buy has agreed to buy digital music provider Napster for $121 million.

Best Buy says it wants to use Napster to reach new customers.

The deal includes $67 million of cash and short-term investments on Napster's books. The acquisition terms value Napster at $2.65 per share, which was nearly double the $1.36 stock closed at on Friday. Best Buy will get Napster's 700,000 digital entertainment subscribers, along with Web-based customer-service platform and mobile capabilities.

The company has been expanding its wireless products and services this year and company officials indicated that acquiring Napster was a continuation of that direction.

"Best Buy intends to use Napster's capabilities and digital subscriber base to reach new customers with an enhanced experience for exploring and selecting music and other digital entertainment products over an increasing array of devices," Best Buy President and Chief Operating Officer Brian Dunn was quoted as saying by the Wall Street Journal.

Still, industry observers questioned the wisdom of the deal with other online options such as iTunes and Amazon pulling more customers, but speculated that Best Buy might be acting to counter the drop in CD sales at its stores over the past few years.