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RealNetworks measures up
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October 17, 2000: 6:59 p.m. ET
3Q profit matches estimates, but stock slides after hours on revenue miss
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NEW YORK (CNNfn) - Web software company RealNetworks Inc. on Tuesday reported a third-quarter profit on par with forecasts, on revenue that nearly doubled year-ago levels, but unimpressed investors dumped the stock in after-hours trade.
The Seattle-based company, which makes software to access audio and video broadcasts over the Internet, said pro forma net earnings for the third quarter grew to $7.6 million, or four cents a share, compared with $4.9 million, or 3 cents a share in the third quarter of 1999.
 Wall Street analysts had expected a profit of four cents a share, according to First Call. The profit figure matched the lower end of analysts' average forecast. Some analysts had expected earnings of up to 6 cents a share.
While the company said its third quarter revenue nearly doubled to $67.1 million, from $34.9 million in the third quarter of 1999, some analysts had predicted revenue would come in even higher.
The report was released after the close of trade on Tuesday. During the regular session, shares of RealNetworks (RNWK: Research, Estimates) slipped $3.12 a share, or about 12 percent, to $21.69.
The sell-off continued in after-hours trade, where the stock plunged 17 percent, to $17.94 a share, down $3.75.
Analysts linked the slide to the company's lackluster results and a less-than-enthusiastic conference call in which the company was vague regarding its plans to energize results in future quarters.
"They have nothing to celebrate," said Nitsan Hargil. "Revenues were just 'blah' all around. Very mediocre in all segments."
"I think everyone was expecting them to beat (forecasts)," he added.
Company expects growth as content distributor
A pioneer in so-called "streaming media" software, the company has in the past year set its sites on becoming a content distributor, via partnerships with hundreds of broadcast networks, software manufacturers and makers of original programming.
"Our third quarter results demonstrated the ongoing strength of our business model," said Rob Glaser, chairman and chief executive of RealNetworks. "We also delivered on the growth strategies that are enabling us to expand our industry leadership position, including advancements focused on accelerating the adoption of Internet media and the viable business models to support it."
The company said it expects to see more revenue in the fourth quarter from its RealPlayer GoldPass subscription service, which was introduced in the third quarter and, as such, saw limited sales.
 The company said it benefits from a strong presence on the installed base of personal computers. It boasts more than 150 million unique registered users of its free RealPlayer software, and says some 200,000 new unique users begin using RealPlayer every day
Despite the recent operating and strategic challenges to Internet businesses, RealNetworks noted that its business remains strong, thanks to diversified revenue streams. Still, Chief Financial Officer Paul Bialek said on the conference call that the company's results would be affected by an industry-wide slowdown in Internet advertising.
The company revealed that it has renewed several "large" advertising deals at levels lower than in previous quarters. It expects about $3 million in revenue that existed in third quarter contracts, will not carry over into fourth quarter results. 
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