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Friday, July 28, 2006, 11:00 am PT (02:00 pm ET)

PortalPlayer CEO throws in the towel

The chief executive of PortalPlayer, a company that helped fuel the iPod revolution with its digital media player chips, has decided to step down, the company said Thursday.

Prospects for the San Jose, Calif.-based company turned grim earlier this year after Apple Computer said it would not use the company's PP5021 System-on-Chip (SoC) in the next-generation of its iPod nano digital music players. PortalPlayer responded by shedding nearly 14 percent of its work force.

In a statement on its Web site Thursday, PortalPlayer said Gary Johnson, the company's president, chief executive officer and a director, planned to resign by the end of the year in order to pursue interests at other companies that had yet to issue a public offering.

"My true passion is in leading companies through their initial rapid growth," said Johnson. "When I joined PortalPlayer, the company had one product and very limited cash. Today, it has several design teams working on products for three major personal multimedia player markets and nearly $200 million in cash."

PortalPlayer's chips have been a fixture in almost all of Apple's iPod models over the years, but in April it was revealed that Apple had chosen SoCs from Samsung to form the core of its upcoming players. As a result of the news, shares of PortalPlayer bled nearly half of their value in 24 hours. Since February, the stock has lost about two thirds of its total worth.

The somber outlook for PortalPlayer continued this week, as the company announced that earnings for its most recent quarter fell over 75 percent compared to the year ago quarter.

PortalPlayer has initiated a search for a new CEO, the company said.