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UBS will look into the possibilities of either selling the digital music service or forming partnerships with other companies.

Chris Gorog, Napster's CEO, said that interest in a possible acquisition had risen following an upsurge in the company's performance, notably after its launch of a free, advertising-supported music service saw it cut its losses by $10 million in the last quarter.

'Our goal is to enhance shareholder value which could potentially lead to a new strategic partnership or the sale of the company but in any event our primary focus will remain on growing Napster,' Gorog said in a press statement.

He added that Napster has not set a timetable for the UBS report.

Napster CFO Nand Gangwani said that the company had much to commend it to potential buyers, including a strong brand, its distribution technology, a subscriber base of half a million, inexpensive price and $97 million in cash. He said that he expects subscriber numbers to grow strongly in the second half of the financial

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year, when the company will launch in Japan.

'For the second half of our fiscal year, we project a strong up-tick in subscription growth from a base of more than half a million subscribers and a significant expansion of our mobile business, including the addition of new tier one wireless partners,' Gangwani said.

The identities of potential purchasers were not disclosed, although various media companies and mobile phone carriers have been suggested in press reports. But with both Samsung and Microsoft following Apple's lead in tying together portable music players and digital music stores, not to mention the Real-SanDisk partnership, Napster may provide an opportunity for the likes of Creative, who do not have their own music retail channel.

Signs that the likelihood of a Napster takeover has increased are evident in a noticeable change in Gorog's public utterances on the subject. In January, speaking at a music industry get-together in France, he rejected suggestions that the company would be sold. However last month his tone was very different, saying that the company's management does not have 'our heads in the sand' about a possible merger or acquisition.

'We will always carefully weigh any valuation alternative against the opportunity and risk associated with continuing as a stand-alone company,' he told analysts.

Napster shares rose 11.3 per cent following the UBS appointment.