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RealNetworks suffers during Net ad slowdown

The maker of Internet media player software warns of lower quarterly earnings, becoming the latest company to get hit by slowing online advertising sales.

RealNetworks, a maker of Internet media player software, on Wednesday became the latest company to get hit by slowing online advertising sales.

The company said its fourth-quarter earnings will be about 2 cents a share, about half of what Wall Street expected. Earnings tracking company First Call/Thomson Financial projected earnings of 4 cents a share.

RealNetworks said it expects revenue for the fourth quarter of between $58 million and $60 million, up 33 percent to 38 percent from a year ago. WR Hambrecht projected fourth-quarter revenue of about $71 million.

In after-hours trading, shares of RealNetworks fell $4.68, or 42 percent, to $6.31.

The initial reaction from investors was quite different from RealNetworks' take. On a conference call with analysts, chief executive Rob Glaser said the company's long-term outlook remained strong. Executives projected 2001 revenue of $300 million, down from estimates of about $331 million.

Glaser said that the companies that survive what he called "the capital market turmoil" will have diverse revenue streams, strong operations and target markets that are likely to become profitable. 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. The company's shares were hammered in October after it met estimates in the third quarter but said advertising revenue would fall 20 percent sequentially.

In October, RealNetworks executives indicated that the decline in advertising revenue would be offset by license and services revenue.