Online music service Napster Inc. on Thursday raised its quarterly outlook, citing strong subscriber growth, sending its shares up 16 percent.
For the fourth quarter that ended on March 31, the company said it would post more than $26 million in revenue, a "substantially narrower" net loss than earlier forecast, and a total subscriber base of more than 600,000 users worldwide.
Analysts, on average, had expected fourth-quarter revenues of $25.04 million and a per-share loss of 36 cents, according to Reuters Estimates.
Piper Jaffray analyst Gene Munster said the subscriber count was ahead of his expectations of 573,000 at quarter's end.
Munster, in a research note, said the "positive preannouncement shows that Napster (subscriber) adds are tracking ahead of plan and provide us with more confidence that the company will remain healthy as it works to launch the new Napster.com."
Napster.com is due to launch over the coming months and is expected to feature a free service supported by advertising.
In its statement on Thursday, Napster said that based on the expected revenues for the quarter, it will post revenue growth of approximately 100 percent year-over-year. It said it expects to report a cash and short-term investments balance in excess of $103 million.
The company is scheduled to report quarterly results on May 17. Napster has one of the better-known names in the online music business but has failed to make a dent in the 80 percent market share of Apple Computer Inc.'s iTunes.
Napster stock rose 51 cents or over 15 percent to $3.88 in Nasdaq trade.
Napster's loss had widened to 40 cents per share in the third quarter, hurt by a sharp rise in spending on sales and marketing, despite revenue that nearly doubled. It reported more than 500,000 subscribers.