K-tel's stock doubled on Tuesday after it said its music and video-selling Web site will appear as a link on Microsoft's MSN Network.
Shares of KTEL (KTEL), which publishes "greatest hits" music compilations, closed up US$11.38 at $22.94. Earlier, they traded as high as $32.25 -- a 179 percent jump.
MSN will include a link to the K-tel Express site on the MSN shopping channel. The link possibly will appear on other Microsoft (MSFT) sites like Microsoft Plaza, MSNBC, Sidewalk, and microsoft.com, K-tel said. In return, K-tel will sport a link to MSN Shopping on its site.
A Microsoft spokeswoman said MSN still will have links to other e-commerce sites like Amazon.com. The deal is good for MSN because surfers will have access to K-tel's compilations, she said. "K-tel doesn't have a complete offering," she said. "So its very complementary."
K-tel Express was launched on 1 May. Since then, K-tel has also been promising customizable CDs, where users can choose the tracks themselves. K-tel also recently said it will provide digital downloads for sale.
This is the third huge, one-day stock surge for K-tel in a year. The first was last April, when K-tel launched its Web site and tried to take on the likes of CDNow (CDNW). The stock fell after analysts became skeptical about K-tel's viability online. The second was last week, when K-tel said it would create a co-branded online music store with Playboy Online (PLA).
Skepticism about K-tel remains.
"They have a unique set of inventory with their compilations," said Nicole Vanderbilt, analyst with Jupiter Communications. "They'd be wise to focus on that."
With CDNow's agreement to take over competitor N2K, and Amazon's entry into music retailing, "the music market is an extremely crowded space," she said.
"K-tel seems to be a brand that attracts speculative investors," said Vernon Keenan, analyst at Keenan Vision. "So that creates volitility in the shares."
And it's "not clear" that deals with Microsoft and Playboy will translate into a big jump in revenue for K-tel, he said.
A spokesman from K-tel said the company does not release separate revenue figures for its online site.
