Napster Beats Estimates - Shares Lower on Soft Guidance

Napster reported better than expected 3Q07 results on strong subscription growth. By the numbers, Napster reported a net loss of $9.5 million, good for EPS of -$0.22, versus a loss of $17 million, (EPS of -$0.40) in the year earlier period. Analysts were expecting an EPS loss of $0.29 on revenue of $28 million. Looking to next quarter, management expects revenue to pass $26 million coupled with declining operating expenses; the Street was expecting revenue of $28.9 million and a per share loss of $0.24. Napster expects to add several hundred thousand subscribers due to a deal to become AOL's exclusive online music download service though the revenue impact of these new subscribers won't be reflected until its June quarter. Shares traded lower by $0.21, or 5.13%, to $3.88 in after hours action.

Sources: Napster F3Q07 (Qtr End 12/31/06) Earnings Call Transcript, Press Release, Forbes, CNN Money/Reuters
Commentary: Will All the Napster M&A Talk Ever Amount To Anything?, Napster Optimistic About Its Future, No Growth In Digital Music Sales?
Stocks/ETFs to watch: Napster (NAPS), Time Warner (TWX). Competitors: Apple (AAPL), RealNetworks Inc. (RNWK)

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