MP3.com Tones Down Losses, and Revenues

Aug 01 2001

Digital music company MP3.com reported pro forma second-quarter earnings Wednesday that beat analyst estimates even as revenues shrank from year-earlier levels.

MP3.com posted a pro forma net loss, which excludes some expenses, of $1.6 million , compared with $5.2 million a year earlier. The average estimate of three analysts polled by Thompson/First Call was a loss of 4 cents per share. Including all costs, MP3.com reported an $11.6 million loss for the quarter, compared with a loss of $177.1 million for the second-quarter 2000.

The San Diego-based company, currently being acquired by media conglomerate Vivendi Universal, reported that second-quarter revenues for the period ending June 30 fell 13.4 percent, to $17.5 million from $20.2 million the same period a year ago.

The quarter was MP3's first to post positive pro forma EBITDA , of $662,000. EBITDA is a widely used measure of cash flow.

MP3.com announced in May that it is being purchased by Vivendi Universal for $372 million, or $5 a share, a 66 percent premium over its $3 stock price at that time. The move was a major signal of how record labels are wresting control of online music from startups that had dominated the space.

Vivendi Universal's Universal Music Group was among the major record labels that sued MP3.com for alleged copyright infringement, targeting a service called My.MP3.com that allowed users to hear digital streams of CDs they owned from any Internet-connected PC. Universal was the last major label to settle its suit against MP3.com, only after MP3.com agreed to pay the record company $53.4 million in damages. The settlement also included the option to buy MP3.com shares.

MP3.com shareholders are scheduled to vote on the Vivendi acquisition in a special meeting on Aug. 27. MP3.com will provide the back-end technology for Pressplay, a new online music-subscription service that Universal and Sony plan to launch as a joint venture later this summer. MP3.com also will offer the Pressplay service on its site.

Shares of MP3.com barely budged Wednesday, closing at $4.96, or 0.4 percent above the previous day's close.