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Thursday, July 29, 2004 - Page updated at 12:00 A.M.
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RealNetworks' 2nd-quarter revenue soars

By Kim Peterson
Seattle Times technology reporter

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RealNetworks yesterday reported its highest quarterly revenue in nearly four years — and the second-highest in its history — as its digital-music and Internet-game sales continued to grow.

The Seattle digital-media company said it was still on track to become profitable by the end of this year, excluding legal expenses related to its antitrust lawsuit against rival Microsoft.

For its second quarter, ended June 30, RealNetworks reported $65.5 million in revenue, up 32 percent from the same period in 2003. The company reported a $4.6 million net loss, or 3 cents per share, in the quarter, compared with a $9.6 million net loss, or 6 cents per share, for the same period in 2003.

Excluding its antitrust legal costs, RealNetworks reported a $1.9 million net loss, or a penny per share. Analysts had been expecting a net loss of 4 cents a share, according to Thomson First Call.

RealNetworks also said it has 1.4 million paying subscribers, including 550,000 who pay for its Rhapsody music and its premium radio services. The majority of the rest subscribe to the company's SuperPass service, which provides access to a variety of content.

RealNetworks said yesterday that in August it will raise the monthly price of SuperPass by $3 to $12.95 a month. It will include in that price one free online game download and two song downloads per month, as well as a broader premium radio offering.

The idea, executives said, is to increase the gross margin of SuperPass as well as expose those subscribers to RealNetworks' other offerings, such as music downloads.

Revenue from business products and services fell 25 percent from the year-ago quarter to $12.4 million. Chief Executive Rob Glaser said some key deals in this area took longer than expected to close, and will be counted in the current quarter.

RealNetworks said it expects its revenue to be between $66 million and $68 million in the third quarter, with a net loss per share of between 3 and 4 cents. Excluding antitrust litigation, the net loss should fall to between 1 and 2 cents a share.

Alan Davis, an analyst with McAdams Wright Ragen, said the company had a solid quarter and was able to boost its average revenue per subscriber, although its business-products division was still "pretty anemic," he said.

"We're waiting for more evidence that this can become a truly profitable business model," he said.
 
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RealNetworks also said it has hired Robert Acker, formerly a vice president of XM Satellite Radio, as vice president of its RealPlayer business.

It has also hired Aref Matin, formerly an executive at Juniper Networks and Siemens, to focus mainly on the company's work with telecom carriers.

The company's stock price declined 9 cents yesterday, closing at $5.58. It reported the quarterly results after the stock market closed.

Kim Peterson: 206-464-2360 or kpeterson@seattletimes.com

Copyright © 2004 The Seattle Times Company

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