Ugly Conference Call Moments -- Napster Zapped (AAPL, NAPS)

Napster's stock fell by almost 7% in late trading last night, after the company gave what can only be called "disappointing" guidance. Here's the deal: Whenever a CEO or CFO declares with great sincerity that his company has easily enough cash to fund ongoing losses, you know things are bad. Napster's woes, it goes without saying, are good news for Apple (AAPL). Here it is in CFO Nand Gangwani's own words:

Now to guidance. Due to the very recent launch of Napster.com, and the possibility that subscriber growth could slow initially as users experiment with the pay site, our visibility is more limited than usual. Given this uncertainty, we are currently estimating revenue for the first quarter of fiscal '07 to be in the range of $25 million to $28 million. We expect Q1 operating expenses to increase on a sequential basis to approximately $22 million. This increase is based on a one-time marketing spend related to Germany and one-time Napster.com launch marketing activities. We will also be expensing stock options and ESPP shares starting this quarter, which will account for approximately $1 million of increase. We are projecting net loss for the first quarter to be approximately $16 million, implying a loss per share of approximately $0.37.

To conclude my remarks, we ended Q4 with over $104 million in liquid cash and short-term investments and we continue to believe that we have sufficient cash to fund ongoing operations beyond the end of calendar '07. While we expect cash flow to fluctuate from quarter-to-quarter due to the timing of certain large collections and payments and periodic bumps in our marketing span from time to time, we are not planning for substantial increases going forward, and our focus remains on controlling expenditures and managing cash burn downwards over the long-term. We're very excited about the potential long-term positive impact of Napster.com to our financial model and believe that overtime we'll see a significant increase in monthly visitors, the infusion of advertising revenue, and a reduction in subscriber acquisition cost and subscriber churn.

Excerpted from the full NAPS conference call transcript.