By Rex Crum, MarketWatch

Last Update: 1:19 PM ET April 5, 2005

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SAN FRANCISCO (MarketWatch) -- Shares of Napster Inc. surged as much as 19% Tuesday after the online music service raised its fourth-quarter revenue forecast due to a growing subscriber base.

Napster (NAPS: news, chart, profile) pulled back a bit as trading progressed, but was still up 59 cents, or more than 9%, at $6.76 in early afternoon trading.

The Santa Clara, Calif.-based company said it expects to post sales between $16.5 million and $17.5 million when it reports fourth-quarter financial results on May 11.

Napster, which also had increased its revenue outlook back in February, didn`t offer an earnings forecast.

Analysts surveyed by Thomson First Call had forecast a loss of 63 cents a share on $15 million in revenue.

Napster cited increased subscriber growth as the reason for its new revenue outlook. The company said it now has 410,000 subscribers, which include 56,000 university subscribers; it added 143,000 new subscribers in the fourth quarter.

The main push for Napster lately has been for its Napster To Go service. Napster To Go lets a customer download an unlimited number of songs to a portable music player for a $14.95 monthly subscription fee.

The company has entered into marketing agreements for Napster To Go with Creative Technology (CREAF: news, chart, profile) , Dell Inc. (DELL: news, chart, profile) and iRiver.

The service is seen as one of the top challengers to the dominance of Apple Computer`s (AAPL: news, chart, profile) iTunes music store. Apple`s service works only with its iPod music player and sells songs on a single-song or album basis.