Roxio Ditches Software Biz For Napster Focus

Roxio is getting out of the CD-burning software business and betting its future on its fledgling Napster digital music service.

Roxio is getting out of the CD-burning software business and betting its future on its fledgling Napster digital music service.

The Santa Clara, Calif.-based company has signed a definitive agreement to sell its software division to Novato, Calif.-based Sonic Solutions for $80 million, and will now focus on the digital music service it acquired in May of last year. As part of the move, Roxio will change its name to Napster. The publicly traded company will trade under the ticker NAPS.

The deal is expected to close this fall.

The move comes as Roxio today (Aug. 9) reports improved revenues and expanded losses for the fiscal first quarter, which ended June 30.

Net revenue for the quarter increased to $29.9 million from $24.2 million in the first quarter of the prior fiscal year. Net loss for the quarter was $2.6 million, or 8 cents per basic and diluted share. A year ago, the company posted a net loss of $370,000, or 2 cents per basic and diluted share.

In shedding it core software business, Roxio is losing it primary revenue generator. The company's digital media software division recorded revenues of $22 million and net income of approximately $6 million for the quarter. Napster accounted for $7.9 million in revenues -- $1.1 million of which came from hardware sales of MP3 players. Napster's operating loss was approximately $8.1 million.

Roxio chairman/CEO Chris Gorog says the changes will allow the company "to focus all of our efforts on Napster and the fast-growing online music market."

Roxio -- previously a specialist in CD burning software solutions marketed under the Easy CD Creator and Toast brands -- acquired the Napster brand in late 2002. It bought the Pressplay music service in May 2003 to serve as the back-end technology for Napster.

Roxio ended the first quarter with approximately $63.4 million in cash, restricted cash and short-term investments.

For the second quarter, Roxio expects to report total revenues of approximately $25 million. Revenues from the software division are expected to be roughly $17 million. Revenues from Napster are projected to be $8 million.

Shares in Roxio closed up 4% at $4.14 ahead of this afternoon's announcement.

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