As Apple's iPod and iTunes juggernaut was squeezing its stranglehold on the digital music space over the past three years, one of the people who paved the way for Steve Jobs and company was living the good life.

In fact, when asked what's he's been up to since he sold his company MusicMatch to Yahoo in 2004 for $160 million, Dennis Mudd says, "I have to admit, it was a pretty relaxing period of time. I got a little bit more into painting and did a lot of fun bike rides, different places around the world. I went on a trip through East Africa and also a great trip through North Vietnam. I really dropped out of modern civilization for a while."

But Mudd, widely regarded as one of the pioneers of the digital music game, is no slacker.

He has teamed up with a host of digital music vets for a venture that hopes to takes the best of satellite radio and music discovery sites like Pandora to the next level, with a certain eye toward challenging Apple's dominance.

And, appropriately enough, the company is called Slacker. The pitch is personalized portable radio that is constantly fed new content via either Wi-Fi Internet connection or satellite. Mudd calls it "take a gulp" technology.

The Slacker service comes free with banner ads or costs $7.50 a month without. When listening to a song, a user can press the "Love It" button to get more songs like it or the "Ban It" button to never hear it or its ilk again.

"I thought, instead of it really focusing on satellite radio, it seemed to me that it would be a fantastic plank in an overall service where you would send content over satellite and Wi-Fi pipes to portables players to become truly radio, truly portable radio," Mudd says.

In some ways, Slacker takes the recommendation-driven Internet radio of sites like Pandora and moves them into a mobile world. Pandora founder Tim Westergren said Slacker is certainly a player to watch.

"Dennis is a talented entrepreneur, and he's one of the few guys that made it happen back in the ugly days, so anything he does you have to have a healthy amount of respect for," Westergren said.

Cutting the chord between Internet radio and the PC is vital to the business, Westergren says, noting that his company is on the hunt for deals with portable devices.

"It's definitely holding us back and we're not sitting idly by," he says. "Our intention is to make radio, period, and to be radio with a capital R you have to be everywhere, you can't just be on the PC."

To that end, Mudd has taken MusicMatch's once-revered digital jukebox software and beefed it up considerably, with the help of 40 percent of his old team from MusicMatch.

Also on board are hardware execs like Jonathan Sasse, former CEO of iRiver, and Jim Cady, former CEO of the now-defunct Rio, both of whom have led the charge for Slacker to manufacture its own portable device.

Slacker's music player will hit stores this summer and have a wide range of storage capacities and prices. The cheapest Slacker, with a 2-gigabyte flash drive, will cost $150; the largest, expected to have about 12GB, will be $400.

Much like the devices rolled out last year by XM and Sirius, the Slacker device will allow users to store favorite songs on the device.

But while those devices drew the legal wrath of the record labels, Mudd says he's already signed deals to account for the extra perk with three of the four major labels and several indie labels.

"Making our own device is a really critical piece, to be able to control the whole user experience," Mudd says.

That experience is the vital component to Slacker's chances, according to Jupiter Research analyst David Card.

"They have good DNA, so you know they can do the blocking and tackling, so to speak, by making a user interface that's usable and easy," he says.

Card says he's also pleased that Slacker has come up with multiple revenue streams, with advertising, subscriptions, and device sales. They key, he says, is patience.

"I really like their core idea, which is better radio than radio," he says. "But it's going to take them a while to build up an audience, and for the model to work, they're going to need a pretty big audience."