RealNetworks cleared a profit, barely, in its first quarter, surprising Wall Street analysts, who had expected a loss. The Seattle digital media company...

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RealNetworks cleared a profit — though barely — in its first quarter, surprising Wall Street analysts, who had expected a loss.

The Seattle digital media company yesterday reported an $814,000 profit for the quarter, or less than half a penny a share. It was RealNetworks’ first quarter in the black in three years.

For the same period a year ago, the company reported a $10.4 million loss, or 6 cents a share.

Analysts surveyed by Thomson Financial had expected a penny-per-share loss.

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RealNetworks reported a record $76.6 million in quarterly revenue, up from $60.4 million for the year-ago period.

It said it spent $3.7 million, or 2 cents a share, in legal expenses related to its ongoing antitrust lawsuit against rival Microsoft.

The company said its subscriber base grew to 1.85 million, although for the first time it included users who don’t directly pay for its services.

The subscriber figure includes an undisclosed number of Comcast broadband subscribers who, as part of a new partnership between the two companies, can access RealNetworks’ Internet radio service free.

The decision to include subscribers who don’t pay makes it more difficult to view RealNetworks’ subscriber number as a financial indicator.

Company executives said yesterday they lumped the subscribers together to simplify what is becoming a complex picture.

Alan Davis, an analyst with McAdams Wright Ragen, said although the subscriber numbers are somewhat ambiguous, RealNetworks does receive compensation from Comcast in the deal.

“The way those revenues are recognized is a little bit opaque and not entirely clear, but there is economic value to that relationship,” he said.

With the additional Comcast subscribers, the number of RealNetworks’ music subscribers grew from 700,000 at the end of last year to 975,000.

Its music-related revenue rose to $22.2 million from $11.9 million in the year-ago quarter.

The company saw strong sales in its games business in the quarter, as revenue rose to $12.2 million from $6.8 million in the year-ago period.

For the first time, the company broke out the revenue it received from advertising and the distribution of third-party software.

It reported $5.6 million in revenue in the quarter, which included money from partnerships with Google and The Weather Channel.

RealNetworks offers users the option to download Google’s browser toolbar or The Weather Channel’s forecasting application.

RealNetworks said it expects a profit of less than a penny a share and revenue of between $79 million and $81 million for the current quarter.

The company raised its projections for the full year, estimating revenue of between $320 million to $330 million and earnings per share of between 2 and 4 cents.

Kim Peterson: 206-464-2360 or kpeterson@seattletimes.com

RealNetworks

results

Figures in parentheses are losses.
March 31 %
1st QTR 2005 2004 CHG
Profit $814,000 ($10,438,000) n/a
Per share 0.0 (0.06) n/a
Sales 76,572,000 60,390,000 +26.8