It is not a surprise that the Magic would let Udrih go. They already have a full roster and signed Ronnie Price to add point guard depth with Jameer Nelson, E'Twaun Moore and Victor Oladipo likely to share time at the position. The surprise is that Udrih could only get the veteran's minimum. According to Marc Stein of ESPN.com Udrih was deciding between the Grizzlies and the Knicks and canceled a meeting with the Grizzlies after optin for the Knicks' offer.
There is plenty of confusion about why the Magic would not bring Udrih back. Udrih averaged 10.2 points and 6.1 assists per game in 27 games with the Magic last season. He was a solid veteran who was a pass-first point guard and allowed several players to fit into their more natural positions.
There was probably some anticipation from the Magic that Udrih would get a multi-year contract and the Magic were not willing to commit to that in a 31-year-old point guard. Udrih expressed some desire to return to Orlando during last season. Of course, Udrih was very happy to be receiving playing time consistently after struggling to break Milwaukee's rotation at point guard.
The market thinned out much quicker than anyone could have expected for Udrih. The Magic moved on and signed Ronnie Price. So too has Udrih now.
Udrih will likely slide in to play backup point guard for the Knicks behind Raymond Felton. It will also give Udrih the opportunity to play for a winning team again.