Subscriber dissonance.

Not a great week for Napster Inc.

Shares of the Los Angeles-based music subscription service took a hit on news that Yahoo Inc. was introducing its own downloadable music subscription service, Yahoo Music Unlimited.

Then came Napster's fourth quarter financial results, in which the company reported a net loss of $24.3 million, compared with a net loss of $6.6 million for the like period a year earlier. Still, revenues beat analysts' expectations, rising to $17.1 million from $6.6 million a year ago--most likely the result of its boost in subscribers to 412,000 from 84,000 last year.

But Yahoo's announcement overshadowed that good news. Napster stock continued to fall last Thursday, closing at $3.95, despite management attempts to quell the panic. Napster Chief Executive Chris Gorog called it "a significant overreaction," pointing out that Napster was able to fend off discount giant Wal-Mart Stores Inc. in the subscription-music space. "We have proven time and time again that we can compete and out perform," Gorog said during Wednesday's conference call.

Yahoo priced its service aggressively: per month, with a year's subscription of $60, compared with the $14.95 per month/$180 per year portable subscription service Napster to Go. Yahoo even undercut Apple Computer Inc.'s iTunes Musicstore, which sells individual songs for 99 cents; Yahoo Music Unlimited will charge 79 cents. (Apple's stock also stumbled after the Yahoo announcement.)

Gorog released a subsequent statement claiming that Yahoo's deep discount wouldn't last. But analysts seemed skeptical. P.J. McNealy of American Technology Research reiterated his "hold" rating on the stock, because he said the earnings outlook had become unclear.

McNealy focused on the company's refusal to give guidance for the coming year. "Napster, which should know all of the factors for fiscal year '06, does not want to hazard a guess at how much it can grow revenue or subscribers or how much it may lose in earnings," he wrote.

Gorog emphasized that new branding opportunities were in the works--the company recently started selling ring tones--but he was short on details, saying the company would provide more "when appropriate."

Gene Munster at Piper Jaffray Co. maintained his "outperform" rating, despite the precipitous fall. "We believe the downside to shares is limited," he wrote in a research note. The biggest threat from Yahoo, Munster contended, was pricing pressure, which he chalked up to catch-up tactics. (Piper Jaffrey has performed investment banking services for Napster in the past year, the note disclosed.)