RealNetworks’ Loss More Than Doubles
Despite growing sales and a larger base of subscribers, RealNetworks Inc. on Thursday reported a wider quarterly loss due to lower profit margin and higher legal expenses.
The company reported a loss of $5.3 million, or 3 cents a share, on revenue of $54.1 million in the quarter ended Dec. 31. Although the loss was in line with analysts’ expectations, it was more than double the loss of $2.5 million, or 2 cents a share, reported a year earlier, despite a 17% increase in revenue.
Chief Executive Rob Glaser noted that the company’s sales have grown for six consecutive quarters, and that it had cut its annual loss from $38.4 million in 2002 to $21.5 million in 2003. Total revenue for the year grew 11% to $202.4 million.
That growth was driven by the company’s consumer software and services business, which accounted for more than three-quarters of Real’s sales in the fourth quarter. The company reported more than 1.3 million subscribers to its Internet audio and video services, including more than 350,000 for its Rhapsody on-demand music and RadioPass radio offerings.
The combined audience for Rhapsody and RadioPass is the largest of any subscription online music service, representing almost 45% of the market, Glaser estimated.
The music services generated $7.9 million in revenue during the quarter, up 71% from the previous quarter, when Real acquired Rhapsody.
A significant new expense for Real is its antitrust lawsuit against rival Microsoft Corp., which it accuses of using its dominance over computer operating systems to compete unfairly in the market for digital media technology. The company said $1.6 million of its quarterly loss stemmed from the suit. The firm expects $3 million in such expenses in the first quarter.
Meanwhile, what was once the heart of Real’s business -- selling digital media technology to online broadcasters and other commercial customers -- continued to dwindle. Revenue from technology products and services dropped 7% in the quarter, to $12.8 million, compared with $41.2 million in revenue from consumer products and services, up 27% from the previous year.
The shift away from technology sales pushed Real deeper into the red because consumer products and services have lower profit margins. The company reported that its gross margin was 62%, down from 71% in the fourth quarter of 2002.
Glaser said that “while we have not yet crossed back into profitability, we believe we’re in a position to do so” by the end of 2004 -- but only if expenses from the Microsoft suit are excluded.
On Nasdaq, Real’s shares dropped 30 cents to $6.14 before the company announced its quarterly earnings. After the announcement, shares fell as low as $5.90 in after-hours trading.
