The Internet directory giant has held talks about acquiring Sonique, an audio player that can handle Microsoft Windows media files, MP3 files, and audio CDs, according to sources familiar with the negotiations.
The audio software is created by privately held Mediascience. It was developed by two computer programmers from Montana State University and is considered a head-on competitor to Nullsoft's Winamp music player, recently acquired by AOL.
No deal is imminent, sources say, and other Internet directories also have expressed an interest in Sonique--chiefly Lycos, which already has an MP3 presence. Sources said another option might be for Yahoo to forego an acquisition and grow the music player technology "in-house."
Either way, Yahoo's keen interest in Sonique indicates a strong desire to expand into the online music business and offer more broadband technologies.
The plans follow America Online's entry into the online music industry, with acquisitions of Net radio firm Spinner.com and Nullsoft. Those all-stock deals were valued at about $400 million.
Any buyout of Sonique's music technology would amount to much less but could still climb into the $100 million range, analysts estimated.
Yahoo, Sonique, Mediascience, and Lycos all declined comment. But sources said interest by the portals in Sonique heated up after AOL bought Spinner.com and Nullsoft.
Yahoo recently jumped into the Net radio business by acquiring Broadcast.com in March for about $5.7 billon. The deal extended Yahoo's reach on the Web for providing audio and video broadcasts.
The company also has outlined aggressive plans to expand into high-speed Internet connections. At an on-site meeting for analysts in March, Yahoo discussed a plan to make a series of high-profile acquisitions.
As a result, many analysts, including Merrill Lynch's influential Henry Blodget, said today that they would not be surprised if Yahoo got into the Net music player business.