Roxio beats forecasts, expects Napster growth

Roxio, parent company of the Napster online music store and service, beat Wall Street's revenue forecast Wednesday and posted a net loss for its fourth quarter that was smaller than expected. It also predicted continued revenue growth for its Napster division.

Roxio had net revenue of US$33.6 million in its fourth fiscal quarter, ended March 31, down slightly from US$33.8 million in the same period a year earlier, but higher than the consensus estimate of US$30.8 million from financial analysts polled by Thomson First Call.

Net loss came in at US$6.6 million, or US$0.20 per share, compared with net income of US$2.3 million, or US$0.12 per share, in the fourth quarter of 2003. However, Roxio did much better in this respect than financial analysts had expected; their consensus estimate called for a net loss of US$0.40 per share, Thomson First Call said.

Roxio's fourth-quarter revenue breaks down into US$27.5 million from the digital media software division and US$6.1 million from the Napster online music division.

Wall Street seemed pleased with the results. Shares were trading at US$4.38 mid-afternoon Thursday, up 7.62 percent from Wednesday's close.

Roxio's software is used primarily for burning CDs and DVDs and for managing, organizing and editing digital content, such as photos, music, video and data. Meanwhile, Napster is both an online music store, selling individual songs and albums, and a subscription service that for a monthly fee lets users listen to its library of more than 500,000 songs.

For the entire fiscal year, also ended March 31, Roxio had net revenue of US$99.3 million, down from US$120.4 million in fiscal 2003. Online music contributed US$12 million, which included the Napster results plus revenue from online music service Pressplay, a spokeswoman for Roxio said. Roxio bought Pressplay in May 2003 and used it to build Napster.

The company's net loss for the full year was US$44.4 million, or US$1.62 per share, compared to a net loss of US$9.9 million, or US$0.51 per share, in fiscal 2003.

For the first quarter of fiscal 2005, Roxio expects net revenue of about US$28 million, with US$21 million from the software division and US$7 million from Napster. It expects to report a net loss per share for the quarter of approximately US$0.26.

For the entire 2005 fiscal year, the software division is expected to generate between US$75 million and US$80 million in net revenue, while Napster should contribute net revenue of between US$30 million and US$40 million, the Santa Clara, California, company said.

After a hiatus due to legal problems, Napster opened its doors as part of Roxio in late October 2003. Through March 31 -- essentially five months of operations -- it generated US$9.7 million in revenue, an average of about US$1.9 million per month. To meet Roxio's revenue targets for 2005, it will need to generate on average between US$2.5 million and US$3.3 million per month.

Napster's first incarnation was as a renegade file-swapping service which music fans used to exchange songs for free. But as Napster's popularity grew, the major record labels went after it in the courts, accusing it of assisting mass copyright infringement, which lead to the service's demise.

Roxio acquired Napster's intellectual property and technology patents for around US$5 million in November 2002, saying an online music service would complement its line of CD- and DVD-burning software.

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Juan Carlos Perez

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