NEW YORK (Reuters) - Online music service Napster Inc. reported a wider quarterly loss on Wednesday, and gave a lower-than-expected revenue outlook, sending its shares down more than 10 percent.

Its net loss increased to $8.5 million (4.3 million pounds), or 20 cents per share, for the fourth quarter ended March 31, from $4.4 million, or 10 cents per share, a year earlier, when it posted a gain of $5.4 million gain from the sale of its consumer software division.

Revenue rose to $29.1 million from $26.8 million.

Napster expects revenue to increase to around $31 million in the June quarter, below the average analyst expectation of $34.2 million.

Shares of Los Angeles-based Napster fell 10.3 percent to $3.67 in extended trading following the earnings report but recovered to around $3.88. Shares closed up 9 cents at $4.07 on Nasdaq.

Chief Executive Chris Gorog told analysts on a conference call the company has retained its relationship with UBS to assist in evaluating merger and acquisition opportunities but is also maintaining its focus on the business.

The company hired UBS last September after it said it received inquiries from prospective partners.

"It was nice to hear that they are still pursuing both options," said Barbara Coffey, an analyst at Kaufman Bros.