May 8 (Bloomberg) -- Warner Music Group Corp., the world's third-largest record company, reported a wider second-quarter loss as taxes increased and compact disc sales fell. The company suspended its quarterly dividend.

The net loss of $37 million, or 25 cents a share, compared with a loss of $27 million, or 19 cents, a year earlier, the New York-based company said today in a statement. Excluding some costs, the loss of 23 cents a share missed analysts' average 11-cent estimate. Sales in the period ended March 31 rose 2 percent to $800 million.

Warner, whose artists include Madonna and Green Day, said online and mobile sales partly made up for a drop in CDs. Record companies have been hurt by piracy of recordings on the Internet and consumer preference for buying single songs rather than full albums. Industry sales of CD albums in the U.S. fell 17 percent this year through April 13, according to Nielsen SoundScan.

``The CD is still under pressure and that trend is the main factor, along with the issue of timing of new releases,'' Tuna Amobi, an analyst at Standard & Poor's in New York, said in an interview before the results. He recommends holding the shares and doesn't own them.

Warner Music, the only standalone record company that is publicly traded, gained 4 cents to $9.05 yesterday in New York Stock Exchange composite trading. The shares have climbed 49 percent this year after declining 74 percent last year.

Taxes Increased

Income taxes totaled $13 million in the quarter, up from $1 million a year earlier.

Sales topped the $777.3 million average of seven analysts' estimates compiled by Bloomberg. The result included the effects of currency changes. At constant currency rates, revenue dropped 3.6 percent.

Recorded music revenue, which comes from CDs, downloads and ring tones, rose less than 1 percent to $652 million.

Warner had hits in the quarter from artists R.E.M. and Nickelback and the soundtrack from the film ``Juno.'' The latest album by Madonna was released in the current quarter.

Music publishing sales, derived from the use of songs in movies, video games and ads, and on radio and television, increased 8.4 percent to $155 million.

Total digital revenue from both recorded music and music publishing jumped 48 percent to $164 million, accounting for 21 percent of Warner's sales, up from 14 percent a year earlier.

The company said it eliminated its 13 cent-a-share quarterly dividend to build cash and make investments in artists.

(The company will hold a conference call at 8:30 a.m. New York time to discuss the results. For access, call +1-800-857- 2625 or +1-210-234-6601.)

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net

Last Updated: May 8, 2008 07:58 EDT