Napster ( NAPS) gave investors something to sing about on Thursday, but for Apple ( AAPL) shareholders the news was seemingly a sad tune. The online music company formerly known as Roxio boosted its revenue guidance for its fiscal fourth quarter by $1 million to $15 million, above the current analysts' consensus of $14.05 million. The company declined to discuss its bottom line for the quarter that ends March 31, but analysts are expecting a loss of 63 cents a share. Napster's modest increase in sales guidance was enough to jolt its stock. In recent trading, shares were up 60 cents, or 8.8%, to $7.40. Earlier in the day, the company's stock traded up as high as $7.70. Meanwhile, Apple shares moved in the other direction. In recent trading, shares of Apple, whose iTunes store is a rival of Napster's music service, were off $2.10, or 4.8%, to $42.02. The stock traded down as much as $2.90, or 6.6%, to $41.22, in earlier trading. Apple has dominated the digital music business with its iTunes store and its popular iPod music players. The success of the latter has helped to propel its stock. With iPod sales boosting the company's top and bottom lines, Apple's shares
tripled last year. Apple has attempted to strengthen its position in the digital music business by cutting prices and introducing new models. But the company faces an array of threats to both iTunes and its iPod series, including increased competition. Napster, for instance, has tried to make inroads into Apple's iTunes market by touting its all-you-can-download subscription service. For a flat-rate of about $15 a month, Napster customers can download an unlimited number of its songs, which are encoded in Microsoft's ( MSFT) Windows Media format. The catch is that Napster, which goes by the name of -- but is not affiliated with -- the defunct, renegade, file-sharing service, will cut off customers' access to those songs if they discontinue their subscriptions.
In contrast, Apple, which encodes its iTunes music files in its own proprietary format, sells individual songs for 99 cents each. Napster's service is part of a broader effort by Microsoft to challenge Apple. The software giant is touting the fact that Windows Media files can be played on an array of devices, while Apple's iPods are the only portable media devices that will play iTunes files. Apple's challengers seem to have little effect on its sales to date. The company has sold some 300 million songs through its iTunes store since the store launched. And the company's iPods generated more than 80% of the total sales of hard drive-based music players last year, according to analysts.