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RealPoetic Justice? RealNetworks rises on Microsoft WebTV deal

RealNetworks Inc. (Nasdaq: RNWK) is getting a boost on news WebTV Networks Inc., a unit of its rival Microsoft Corp. (Nasdaq: MSFT) will use its RealAudio software.

Last year RealNetworks repeatedly attacked Microsoft for allegedly disabling its products on the Windows operating system, pushing shares down.

Shares rose 12 percent, up 9 11/16 to 87 9/16 Friday morning after Web TV's announcement of the deal late Thursday. WebTV will support Seattle, Wash.-based RealNetworks's newest streaming audio format, called RealAudio G2, which competes with Microsoft's Windows Media Player. Microsoft shares were down 1/2 to 90 11/16.

WebTV is already using older RealNetworks formats, but this is the first upgrade since tensions grew between the two companies.

RealNetworks expects the WebTV agreement to increase its audience. An estimated 65 million computers currently use its software. WebTV, bought by Microsoft in 1997, now has almost 800,000 subscribers.

"This agreement allows us to continue to provide innovative audio technologies such as RealSystem G2 to a TV-based Internet audience,'' said Phil Barrett, senior vice president, Media Technologies, RealNetworks..

RealNetworks also plans to adapt G2 to play on Windows CE, which runs on handheld computers, and will eventually power the WebTV box.

Microsoft also announced Thursday that its Windows Media Player also would hit WebTV by the end of the year, keeping streaming video under the Microsoft brand.