Napster Looks For A Buyout
Napster revealed that it has hired UBS Investment Bank to solicit partnership and acquisition proposals for the company. Rumors of such a play first appeared in February, at which time Napster CEO Chris Gorog strongly denied that the company was seeking a buyer. It comes as no surprise to anyone that a company which is hemorrhaging cash needs a bail out, the question is who will take the hit?
“Napster is in a strong position to continue aggressively building our business as an independent company and we are pleased to also have the opportunity to thoughtfully examine potential combinations that may further enhance Napster’s unique strategic and brand position in the center of digital media,” Gorog said. “Our goal is to enhance shareholder value which could potentially lead to a new strategic partnership or the sale of the company but in any event our primary focus will remain on growing Napster.” Napster’s public announcements has certainly proped up their shares which surged more than 12 per cent, to $4.00.
Unfortunately, this Napster is nothing more than a big pig with a fancy dress. Napster has failed to develop anything resembling a healthy business model since it went legal with a music subscription service. The company claims $100 million in annual revenue and more than 500,000 subscribers – numbers which are definitely suspect. Such totals haven’t been enough for Napster to turn a profit, and the company continues to eat away at its cash stockpile, which is now down to $97 million – good maybe for another two years.