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RealNetworks sings MP3 tune with Xing

Online multimedia company RealNetworks says it has acquired privately held Xing Technology, a developer and provider of MP3 software, in a stock deal valued at a maximum of $75 million.

Online multimedia company RealNetworks today announced it has acquired privately held Xing Technology, a developer and provider of MP3 software, in a stock deal valued at a maximum of $75 million.

The move comes just a RealNetworks stock chart day after IBM and RealNetworks announced plans to team up to try to create a universal standard for sending music over the Internet.

Not wanting its drums drowned out by its competitors' music, AT&T also yesterday announced the second version of its a2b music player which it said promises faster downloads and cleaner sound than MP3. And Microsoft today plans to unveil its own audio format, MS Audio 4.0.

RealNetworks hopes to use Xing to reach the growing users of MP3 technology. MP3 (MPEG 1, Audio Layer 3) is an audio compression format that allows users to download music tracks and save them onto a PC hard drive or a portable MP3 player. Xing has been developing high performance, standards-based digital audio and video encoding and decoding technology since 1990.

"With the acquisition of Xing, RealNetworks can now better serve the huge market of new artists choosing to use MP3 to legally distribute their work," said RealNetworks chief executive Rob Glaser. Glaser added that the acquisition will also enhance RealNetworks' efforts to "accelerate the development of digital distribution of music and other forms of digital audio and video."

RealNetworks will acquire Xing in exchange for common stock in RealNetworks with a maximum value of $75 million. The acquisition will be accounted for as a pooling of interests, and is subject to certain customary conditions. The deal is expected to be complete in the third quarter of 1999. RealNetworks expects to record a one-time charge for acquisition related charges upon closing. Upon completion of this acquisition, these new shares will represent approximately 1 percent of total shares outstanding.

Xing's core engineering team will remain in San Luis Obispo, California, which will become a RealNetworks development facility.

"As the leader in enabling and delivering rich media on the Web, RealNetworks was clearly the best and most powerful home for our MP3-based technology," said Xing CEO Hassan Miah.

Xing said it thinks that the majority of all consumer MP3 files have been created with Xing's encoding technology.

The popular MP3 format is quickly becoming a dominant distribution force in the expanding world of music on the Internet and is raising the recording industry's hackles because it offers no protection against unauthorized copying.

RealNetworks saw its stock jump more than 19 percent yesterday after it announced plans to work with IBM. The stock yesterday closed higher 39.5 points, or 19.04 percent, at 247.