RealNetworks Loses 19% on AOL Deal Worries

Another major tech casualty on Tuesday: Shares of RealNetworks, maker of the most popular Internet media player, slumped 19% on concern AOL Time Warner may replace the RealPlayer program as its main software for watching videos on line.

RealNetworks (RNWK) tumbled $2.47 to $10.62 on Nasdaq. The stock recently rallied as high as $14.88 after hitting a 52-week low of $5.03 in March.

The decline was sparked by speculation that AOL was in discussions with Microsoft, RealNetworks’ main rival in Internet media software, about using Microsoft technology with AOL’s Internet service.

AOL and Microsoft have held talks recently about including AOL in the next version of the Windows personal computer operating system. Some analysts have speculated that Microsoft’s media technology may be on the table as part of those talks.

“People are just looking at this environment, that this is something that could happen,” said Heath Terry, analyst at Credit Suisse First Boston.

Some analysts said the concerns are overblown. It’s unlikely that AOL, the largest media company, will replace RealNetworks’ RealPlayer program as its default device for watching videos on the Web, said Philip Leigh, an analyst at Raymond James Financial.

“Our relationship with AOL is extremely deep and healthy,” RealNetworks spokesman David Brotherton said, adding that RealNetworks has a multiyear contract with AOL. He declined to provide specifics.

AOL downplayed the rumors. “RealNetworks is a good partner and we continue to look forward to working with them,” said Jim Whitney, an AOL spokesman.