In anticipation of its annual shareholder meeting on September 18, online music subscription service Napster Inc. [NAPS] has urged its stakeholders to re-elect its existing directors and reject a bid by three dissidents, while acknowledging that the company is again -- or still -- seeking a buyer.
Napster mailed a letter to stockholders acknowledging that it had retained UBS AG to seek a buyer, as it did once previously in September 2006. The revelation came in the midst of a proxy fight launched by three shareholders in May, and about six weeks after Napster attracted attention when its market capitalization fell below the value of its cash on hand, effectively giving the company negative value and making it an especially ripe takeover candidate.
The letter describes upstart board candidates Perry Rod, Thomas Sailors and Kavan Singh as a "musician, assisted living executive and ice cream franchisee [whose experiences are] irrelevant to a company in the highly competitive digital music business," calls them "unqualified," and suggests re-electing the company's three independent directors. Rod launched the dissident trio's bid three months ago, pitching changes to the company's product development, social networking, marketing and outsourcing plans. Napster dismissed their suggestions as a "vague review," and noted that their holdings are quite small.
Nonetheless, Napster's business has been flagging for some time. The company lost 15% of its subscriber base between March 2007 and June 2008, dipping from 830,000 to 708,000, and revenues have dipped accordingly. The company has made up a bit of ground with its new MP3 store and other revenues from non-subscribers, but still posted a loss of $4.4 million on revenues of $30.3 million in the quarter ended June 30.
Its share price enjoyed a small bump since takeover speculation arose in July, but its market capitalization of roughly $65 million still lingers near the value of the cash and cash equivalents on its balance sheet, $67.6 million at the end of June. -- Paul Bonanos
See press release from Napster
See May 20, May 22 and July 18 posts about Napster from Tech Confidential
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