Goals like profitability and free cash flow will have to wait for Napster
The music subscription service posted respectable fiscal fourth-quarter results last night, as long as you know where to look. Sure, the numbers aren't pretty at first glance.
- Net loss doubled to $0.20 per share for the period.
- Revenue inched 9% higher to $29.1 million, even though the company closed out the quarter with 37% more subscribers than it had at this point a year ago.
- The company's cash per share balance has been cut in half over the past two years.
But cut Napster some slack here. Last year's loss was partly offset by an asset sale gain. Loss per share from continuing operations was flat at $0.17 a share. Why didn't the top line reflect the surge in new members? Well, the uptick happened in March, when Napster absorbed 225,000 subscribers that came over from AOL. Time Warner
And even if Napster is down to just $1.53 per share in cash now -- a sliver of the $3.63 per share in debt-free greenery that it was sporting in May of 2005 -- every quarter finds the company burning less cash. That means that Napster's greenbacks will last longer, and sometimes it has opened up the purse strings for good reasons (as when it paid AOL for its orphaned music fans).
As a Napster shareholder, it's easy to be worried. It's not just the music subscription heavies like EMusic and RealNetworks'
At this point, Napster is still more than a year away from generating more cash than it is burning through, but speculators seem to pile on as the stock dips below $4 on buyout rumors. It makes sense. A cheap Napster would be an easy way for any digital music heavy to inherit a storied brand and 830,000 active subscribers. That may make the ceiling too low for longs and the floor too low for shorts, but it's the tune that Napster seems destined to play for now.
Jam on with some blasts from Napster's recent past:
- Napster had just 566,000 subscribers at the end of December.
- 225,000 more came over from AOL Music Now.
- Maybe someone else will profit from Napster's popularity
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Longtime Fool contributor Rick Munarriz isn't a subscriber to any digital music service, even though he does have satellite radio. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.