Napster has announced that it’s looking for buyers.

“In response to recent third party interest in establishing strategic partnerships or potentially acquiring the company, it has retained UBS Investment Bank to assist the Board and management in its evaluation of strategic alternatives,” the company said in a statement.

As recently as a few weeks ago, Napster CEO Dr. William Pence argued that closed digital music systems, like Apple’s and the upcoming Zune system, were doomed.

”Pundits have concluded that Microsoft will abandon PlaysforSure, leaving online music services like Napster, MTV, Yahoo Music, Rhapsody, and presumably even emerging video services like Vongo and CinemaNow, without an underlying platform on which to offer content protection,” notes Pence.

“I believe strongly that the market in the end must and will be based on interoperable digital formats,” he adds. “If DRM is used to erect barriers to that goal, then there is no question it will be swept aside, and the industry may end up with what many have believed was the obvious choice from the beginning: open MP3 files.”

While Pence may be proven to be correct someday, the success of Apple’s closed system, combined with Microsoft’s willingness to lose hundreds of millions of dollars on the Zune to get into people’s hands, is going to put the squeeze on Plays For Sure providers, and ensure the dominance of closed digital music systems for the near future.

Here’s the text of Napster’s announcement:

Napster Engages UBS to Assist in Evaluation of Strategic Alternatives

Napster announced today that in response to recent third party interest in establishing strategic partnerships or potentially acquiring the company, it has retained UBS Investment Bank to assist the Board and management in its evaluation of strategic alternatives.

Chris Gorog, Napster’s Chairman & CEO, said, “Napster is in a strong position to continue aggressively building our business as an independent company and we are pleased to also have the opportunity to thoughtfully examine potential combinations that may further enhance Napster’s unique strategic and brand position in the center of digital media. 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.”

Nand Gangwani, Napster’s CFO, said, “Napster has a strong balance sheet with a healthy cash position of $97 million as of the close of the first quarter and we are currently generating annual revenues in excess of $100 million. 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. We are also looking forward to launching in Japan this fall as scheduled, expanding our global footprint to include the top four music markets in the world.”

The company advised that it has not set a definitive timetable for completion of its evaluation and further that there can be no assurances that the evaluation process will result in any specific transaction. The company also advised that it does not intend to disclose developments regarding its evaluation of strategic alternatives unless and until its Board of Directors approves a definitive transaction.