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Roxio's Loss Widens Ahead of Napster Launch

October 23, 2003|Jon Healey | Times Staff Writer

Roxio Corp. on Wednesday reported lower quarterly sales and higher losses as it prepares to launch what's likely to be its most important product: a new version of the Napster online music service.

In its fiscal second quarter, which ended Sept. 30, Santa Clara, Calif.-based Roxio lost $11.9 million, or 43 cents a share, compared with $1.8 million, or 9 cents, a year earlier. Revenue dropped to $22.8 million, down 18% from last year.

About $9 million of the loss came from Roxio's music division, which is launching an overhauled version of the Pressplay music service under the Napster brand name. The company bought Napster's brand and technology in a bankruptcy auction last year, then acquired Pressplay this year from Sony Corp. and Vivendi Universal.

But the company's flagship CD- and DVD-recording product also took a hit, in part because Dell Inc. stopped bundling the software with its consumer-oriented computers.

Analyst Eugene Munster of U.S. Bancorp Piper Jaffray said developments on the software side of Roxio's business were not as important as the ones on the music side, where "it appears that the company is going to be spending a little more aggressively" than expected on the launch of Napster.

"That's the right thing to do, given that iTunes is in the market," he said, referring to the online music store from Apple Computer Inc. of Cupertino, Calif. "There's going to be market share that's going to be decided in the first six months here. It's going to be easier to win people in the first six months than down the road."

Roxio shares fell 52 cents to $9.51 on Nasdaq. They dropped as low as $8.54 in after-hours trading after the announcement.

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