Nvidia ( NVDA), seeking to expand its reach in handheld music players, agreed to acquire multimedia-chip maker PortalPlayer ( PLAY) for about $357 million.

Nvidia will pay $13.50 a share for PortalPlayer, representing a modest premium over the company's closing stock price of $13.36 Friday and a 19% premium over the 20-day average closing price through Friday. Over the past year, the stock has traded as high as $33.19 in January to as low as $8.76 in July.

San Jose, Calif.-based PortalPlayer makes chips for digital music players, including some of Apple's ( AAPL) iPods. Nvidia makes programmable graphics chips used in computers, consumer electronics and mobile phones.

"Modern mobile devices are miniaturized yet powerful multimedia computers. At the core of their architectures are complex Application Processors integrating microprocessors, system logic, networking, and multimedia processors," said Jen-Hsun Huang, president and CEO of Nvidia. "With this acquisition, we are combining the two essential technologies of next-generation PMPs, PDAs, portable game players, and phones: PortalPlayer's innovative Application Processor technology and Nvidia's industry-leading GPU technology."

The acquisition is subject to regulatory approvals and other customary closing conditions.

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