Wall Street greets Napster's deal with glee, then ennui: stock surges after AOL Music buyout, but falls as hopes for quick sale fade.

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.