Napster, the subject of acquisition rumors for much of 2006, said today that it has hired an investment bank to explore strategic alternatives, including a possible sale of the company.

The Los Angeles-based company, which operates a music subscription service and a free Web-based service that generates advertising revenue, said it has brought in UBS Investment Bank to help it explore its options due to "recent third-party interest."

"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," Chris Gorog, Napster chief executive, said in a statement.

Napster said it had not yet established a timetable for completing the evaluation.

The news sent shares in Napster soaring more than 12 percent in after-hours trading, jumping 44 cents to $3.99.

Napster has had as turbulent a history as any company in the digital music business, spawning the free music revolution from creator Shawn Fanning's dorm room in 1999. Facing a slew of lawsuits from the music industry, the company was forced to close in 2001 and sold the Napster brand name in 2003 to CD-burning software maker Roxio, which had also bought the Pressplay digital music service from Vivendi Universal. Roxio eventually divested itself of the software business, bought the Napster name, and rebranded Pressplay as Napster.

Although it has never been able to rival Apple's iTunes Music Store, Napster previously claimed No. 2 in market share among digital music services at 11 percent. But now it only claims 4 percent, according to the most recent NPD Group data, and its subscriber base dropped 7 percent in the previous quarter.

Napster has also seen partner Microsoft, whose PlaysForSure digital rights management (DRM) technology Napster uses, announce its own Zune digital music store. Zune will use its own proprietary DRM, a move that has many industry analysts thinking the third-party services that use PlaysForSure could be in trouble.

In a response to Zune, RealNetworks' Rhapsody service said today that it was teaming up with SanDisk on a closed ecosystem of a SanDisk Rhapsody player and Rhapsody subscription service.

As for potential suitors for Napster, Google has been frequently mentioned, as has SanDisk. Handset makers could also be interested, as Nokia's recent acquisition of Loudeye and Sony Ericsson's announcement that it will launch a music service both indicate.