San Francisco - HandHeld Entertainment, a maker of portable media players, said on Tuesday that it has acquired Putfile.com, a U.K.-based free digital media service featuring user-generated content, for about $7.1 million.

Under the deal, HandHeld paid $500,000 in cash at closing, and will pay another $580,000 over the next 12 months. The remainder came in the form of stock.

San Francisco-based HandHeld said that the acquisition will enhance its stature in the online video market by significantly increasing its audience.

The company now has more than 425,000 free and premium videos -- including music videos, anime features, television shows, movies, and other programming -- available on its network of websites.

"The Putfile acquisition clearly establishes our place in the online video world," said Jeff Oscodar, the president and CEO of HandHeld.

"With more than 13.7 million monthly unique visitors and 83 million page views combined last month, we have a substantial and engaged audience." The company also said that the move will enhance its chances to reach cash-flow positive by the end of the year.

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