Wall Street Greets Napster’s Deal With Glee, Then Ennui

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Napster Inc.’s deal to take over the business of AOL Music Now was greeted enthusiastically on Wall Street for a short time.


When the resilient L.A.-based music-sharing service announced Jan. 12 that it would buy AOL’s downloading business for $15.6 million, its stock leaped 17 percent to open at $4.49.


But at least some on Wall Street soon said they were disappointed because they had been anticipating a buyout of Napster. Christopher Rowen of Soleil Securities, for example, downgraded Napster to a hold rating and recommended that investors use the surge in price to take profits on the shares.


“While this is good for Napster as an operating company, we believe the increased breathing room reduces the likelihood of a near-term sale,” Rowen wrote in a report.


Indeed, some liked the deal because it improved Napster’s prospects. The deal means a significant boost in Napster’s business because it adds more than 350,000 subscribers to Napster’s 566,000 members list.


If all goes as Napster executives plan, the added subscribers will attract yet more subscribers and allow the firm to leverage infrastructure costs across a greater number of customers, which could allow the company to break through to profitability.


Mark Harding, an analyst with Maxim Group LLC, likes the idea.


“We believe that the acquisition (of AOL Music) is both the quickest and cheapest way to increase the company’s subscriber base, and achieve a sufficient critical mass to reach breakeven,” wrote Harding.


After the surge, Napster’s stock price settled down quickly. It closed Jan. 17 at $4.09, 6.8 percent above the pre-announcement closing price.


The company plans to make more details known in its earnings call scheduled for Feb. 8.



Digital Dough

Speaking of making money on music sales in the digital age, that will be the focus of the Hollywood Digital Music Summit on Wednesday and Thursday, Jan. 31-Feb. 1, at the Bel Age Hotel in West Hollywood.


Executives from the music business, film studios, technology companies, wireless carriers and the investment community will share their perspectives.


Speakers will include Larry Kenswil, Universal Music Group President; Dave Goldberg, Vice President and General Manager of Music at Yahoo! Inc.; Chris Stephenson, General Manager of Global Marketing; Gary Churgin, President and CEO of the Harry Fox Agency; Terry McBride, Founder and Chief Executive of Nettwork Productions; and Virgin Mobile USA Chief Marketing Officer Howard Handler.


To register, contact www.ihollywoodforum.com or call (310) 566-7745.



Gallic Breadth

Paris-based Avanquest Software Inc. becomes one of the largest consumer software publishing firms in the U.S. with its buyout of Calabasas-based Nova Development.


Avanquest will pony up $34.5 million in cash, paid in three installments over 18 months, and $13.5 million worth of Avanquest shares for Nova’s current crop of consumer graphics and content software products for Windows and Macintosh platforms.


Avanquest chief executive and president Christina Seelye said Nova founders Roger Bloxberg and Todd Helfstein would share a seat on the Avanquest board and be retained to help guide the sale transition.


Avanquest wants Bloxberg and Helfstein to focus on international development of the group’s sales as well as overseeing synergies on all the company’s levels.


“This transaction creates for both parties an enhanced leadership position among consumer software publishing companies both in North America and Europe and creates immediate new opportunities for each party’s existing software content in the other’s channels,” Bloxberg and Helfstein said in a statement.


Nova, which was founded in 1984, employs about 70 employees and there are no plans for layoffs, according to Avanquest executives.



Shop Talk

Multi-merchant online marketplace Shop.com will open an office next month in Pasadena.


Separately, the firm has named Mondy Beller senior vice president of marketing. Beller will be responsible for the firm’s overall marketing strategy, from site design and customer experience to external communication and promotion. She reports to Shop.com Chief Executive Ken Goldstein.


“Mondy displays an extremely broad set of both creative and analytical skills that are rare in combination,” Goldstein said.


“In particular, her deep experience in online marketing combined with her traditional background in brand building will allow us to aggressively advance Shop.com as the destination shopping portal of choice.”


Beller formerly worked for JupiterImages, Shoes.com and Ticketmaster Online-City Search.



R-2 Bust You

Pasadena-based Evolution Robotics Retail has signed with Shoppers Food & Pharmacy, which is a division of SuperValu Inc., to help find shoplifters.


Shoppers Food will deploy Evolution Robotic Retail’s LaneHawk visual scanner at six stores. The scanner is used to detect items in the bottom of shopping baskets. Shoppers Food has 64 stores in Baltimore, northern Virginia and Washington D.C.



Staff reporter Dan Cox can be reached at (323) 549-5225, ext. 230, or at

[email protected]

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