Edging Earnings Expectations, RealNetworks Turns Its First Profit

The manufacturer of the RealPlayer and RealJukebox topped its third-quarter earnings consensus by a penny a share.
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For the first time in its five-year history,

RealNetworks

(RNWK) - Get Report

has achieved the respectability of profitability, and it also slightly exceeded Wall Street's earnings expectations.

The Internet software company said today that in the third quarter it earned $4.4 million, or 5 cents a diluted share, excluding an acquisition charge. A consensus of analysts surveyed by

First Call/Thomson Financial

had forecast earnings of 4 cents a share.

Investors were also anticipating the profit, and they sent the company's stock up 7 15/16 to 103 3/8 during today's trading session. When the earnings were announced after the market closed, the stock edged up another 7/8 in after-hours trading.

"Demand for their technology is pretty strong, and it's growing as fast as the market will accept their technology," said Greg Vogel, an Internet software analyst at sell-side firm

Banc of America Securities

. (Banc of America, then

Montgomery Securities

, helped underwrite the RealNetworks IPO in 1997.)

Including a one-time charge of $1.4 million for its acquisition of

Xing Technology

, RealNetworks reported net income of $3 million, or 3 cents a diluted share, in the quarter ended Sept. 30. That compares with a net loss of $2.5 million, or 4 cents a diluted share, in the same quarter a year ago.

Revenue nearly doubled to $34.9 million this year from $17.7 million a year ago.

RealNetworks is hardly lacking in credibility. After all, it's widely considered the uncontested leader in the distribution of real-time streaming media content over the Internet, with no real competition. Users of the company's RealPlayer and RealJukebox products now number 80 million and 12 million, respectively.

Additionally, its advertising revenue doubled to $4.1 million from $2 million, and traffic to its Web sites is extremely high.

The company said

Media Metrix

had ranked its Web sites No. 12 in popularity among all Web properties.

"We are especially excited by the rapid development of the digital-music market," Rob Glaser, chairman and CEO of RealNetworks, said in a statement.