Napster

(NAPS)

surged 5% late Wednesday after the digital music outfit reported a smaller-than-expected fiscal third-quarter loss.

The Los Angeles-based company said its latest-quarter loss was $17 million, or 40 cents a share, compared with a year-ago loss from continuing operations of $3.7 million, or 10 cents a share. Sales jumped 94% to $23.5 million, helped by the surging popularity of its premium service, which saw a 110% increase in subscribers. Operating expenses rose 35% to $25.6 million.

Analysts surveyed by Thomson Financial were looking for a 61-cent loss. Sales matched the consensus forecast. Shares rose 17 cents to $3.78 in after-hours trading.

Napster projected revenue in the current quarter of $25 million, lower than the $26 million expected by analysts. Operating expenses are expected to decline. The company also has enough cash equivalents and short-term investments to fund its operations through the end of next year.