SanDisk (NSDQ: SNDK), the maker of the Sansa line of MP3 players (a distant iPod competitor), has acquired MusicGremlin, a maker of technology to deliver music over Wi-Fi. Terms of the deal were not disclosed.

Among its products: MP3 players that can access an online music store directly from any Wi-Fi hotspot, allowing users to get songs either through a subscription model or a la carte. It also touts technology that works with other electronics to deliver wireless music. The company was founded in 2003 and launched its first music players in the market in 2006, though the service and the player never really took off. The company had raised about $5 million in two round, and included Allen & Co as investors.

Sandisk says MusicGremlin technology will power the next generation of its MP3 players. Robert Khedouri, co-CEO of the NY-based company, will join Sandisk as VP of services. Release.

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