Music download and subscription service Napster announced that they’ve hired an investment bank to assist them with a sale of the company earlier today. This move was “in response to recent third party interest in establishing strategic partnerships or potentially acquiring the company.”

At first glance the company looks very healthy, with annual revenue of over $100 million and another $100 million in cash. The problem, however, is that their business has extremely low margins. This last fiscal quarter the company lost nearly $10 million from operations (or $40 million annualized). Getting Napster to profitability isn’t going to happen in this very crowded music market. For more on Napster’s competitors, see our recent analyses of the music download services and music subscription services. Napster does not offer the best, or cheapest, product in either category.

That doesn’t mean Napster won’t sell for a lot of money, though. A good investment bank sells based on fear and greed. And lots of players fear being left out of the music revolution occuring right now. Napster may be just what they are looking for. For a recent example, see Montgomery Securities recent sale of Grouper to Sony for $65 million in cash, something no one expected would happen.