D&M Holdings Inc. has announced the sale of the intellectual property and other technology assets for the Rio MP3 player to SigmaTel Inc., which provides flash chips for Apple's iPod shuffle as well as the chips for MP3 players from Creative, Samsung and other companies. Under the deal, SigmaTel will also acquire most of the Rio technical development team, while Rio will hold a no-fee, grant-back license that enables it to continue to access the MP3 technology it developed.

According to an article at AppleInsider: "While SigmaTel supplies Apple with controller chips for the nearly 1 million iPod shuffles it sells each month, the company is rumored to have lost technology bids for forthcoming flash-based iPods." Thus, the Web site noted, "the move by SigmaTel to acquire Rio's assets may be a strategic one aimed at securing its prominence in the MP3 player market."

Another AppleInsider article posted earlier in the week cites a research report from analyst Shaw Wu that speculates Apple may have tapped PortalPlayer to provide the system on a chip for a forthcoming 2GB iPod mini that would use flash storage, rather than a hard drive. PortalPlayer already provides the systems on a chip for the iPod mini and full-size iPod.

Rio's Cambridge, England- and Santa Clara, Calif.-based design team has created hard drive designs based on SigmaTel's 3500 family of audio system on a chip solutions, according to a press release issued by SigmaTel. "Not only will SigmaTel be able to more rapidly meet the needs of our large and growing customer base in the flash and hard drive digital audio market, but we will also be able to accelerate the development of our multimedia solutions," said company CEO Ron Edgerton.

SigmaTel also gains as many as 15 patents and patent applications, including some that are among the first ever issued for MP3 player technology. Financial terms of the deal with D&M Holdings were not disclosed.