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RealNetworks' loss shrinks, sales rise

The digital media software maker reports that fourth-quarter loss narrowed and revenue grew slightly, meeting analysts' expectations.

Digital media software maker RealNetworks on Tuesday reported a narrower loss and slightly higher revenue in the fourth quarter compared with the same period in 2001, meeting analysts' expectations.

The Seattle-based company reported a net loss for the period ending Dec. 31 of $2.5 million, or 2 cents per share, on revenue of $46.2 million. That compares with a loss of $11.8 million, or 7 cents per share, on revenue of $45.4 million in the same period a year earlier.

Analysts expected RealNetworks to report a loss of 2 cents a share, according to a survey by Thomson First Call.

For the year, RealNetworks reported a net loss of $38.4 million, or 24 cents per share, on revenue of $182.7 million.

For the first quarter of 2003, the company said it expects continued losses. It anticipates a net loss in the range of 2 cents to 4 cents per share, on a GAAP (generally accepted accounting principles) basis. Still, RealNetworks said the first three months of 2003 should bring slight quarter-over-quarter revenue growth due to an expected rise in subscription sales. As a result, it plans to hire additional employees, as well as invest in technology and marketing to support its consumer business.

At the close of regular trading, RealNetworks shares were up 8 cents to $3.31. The earnings report was issued after the close of regular trading.

RealNetworks CEO Rob Glaser attributed the slight growth in revenue to the digital media company's subscription business.

"In 2002, we continued the process of transforming RealNetworks into the leading provider of digital media subscription businesses, built on a foundation of world-class technology," Glaser said in a statement.

He said that consumer subscription revenue grew from $28.2 million in 2001 to $75.5 million in 2002, up about 167 percent year-over-year.

"This revenue was built on more than 80 percent growth in our paying subscriber base from the end of last year, a deepening of the content we offer consumers and release of our newest award-winning RealOne consumer player," he added.

While earnings were buoyed by subscription sales, sales sank in the company's systems business, thanks to weaker spending in the industry and ongoing competition from Microsoft. In the fourth quarter, it reported that systems revenue decreased to $13.8 million from $15.5 million in the third quarter.

To combat falling market share in the systems business, RealNetworks last year released the source code to its digital media technology platform, dubbed Helix. The company recently announced that it has more than 10,000 members in the Helix developer community, including Cisco Systems, Hewlett-Packard and Nokia.

Still, Microsoft is a formidable threat, given that it includes its streaming server software in its Windows operating system.

In the fourth quarter, RealNetworks said its consumer subscription businesses reached about 900,000 paying subscribers.

In a separate announcement, RealNetworks named Jonathan Klein, founder of image licensing company Getty Images, to its board of directors.