RealNetworks (Nasdaq: RNWK) became the latest company to get hit by slowing online advertising sales. The company said Wednesday that its fourth quarter earnings would be about 2 cents a share, about half of what Wall Street was expecting.
Earnings tracking firm First Call Corp. projected earnings of 4 cents a share. Revenue for the fourth quarter would be between $58 million to $60 million, up 33 percent to 38 percent from a year ago. W.R. Hambrecht was projecting fourth quarter revenue of about $71 million.
In afterhours trading, shares of RealNetworks fell 42 percent, or 4.68, to 6.31.
The initial reaction from investors was quite different from RealNetworks' take. On a conference call with analysts, CEO Rob Glaser said the company's long-term outlook remained strong. Officials projected 2001 revenue of $300 million, down from estimates of about $331 million.
Glaser said the companies surviving what he called "the capital market turmoil" will have diverse revenue streams, strong operations and a good market to target. RealNetworks, which collects revenue from software licensing, services and advertising, has "never pumped out more bits," said Glaser, who noted that broadband adoption will fuel the company into the future.
"It's hard to say how long the turmoil will last, but we are comfortable with our model," said Glaser. "We will weather this and get through it."
Concerns about RealNetworks' ability to weather the online advertising slowdown emerged in the third quarter. RealNetworks shares were hammered in October after the company met estimates in the third quarter, but said advertising revenue would fall 20 percent sequentially.
In October, RealNetworks officials indicated that the decline in advertising revenue would be offset by license and services revenue.>