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RealNetworks To Spin Off Its Game Business; May Do An IPO Of The New Company

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Here’s a shocker: RealNetworks (NSDQ: RNWK) is finally doing the rationalization of its business lines: it will separate its global casual games business into an independent company and distribute shares of the newly created games company to its shareholders, it said. RealNetworks may precede the spin off with an IPO and sale of up to 20 percent of the shares of the new games company. This would happen by the end of this year, the company said.

The rationale: It results in two “more flexible and focused companies. In addition, the separation will provide the games business with an industry-specific currency for future acquisitions and enhance its ability to attract and retain the best talent in the industry.” Also, it will result in lower complexity in understanding and tracking RealNetworks’ performance, the company said.

As for the size of the games business for the company: In Q108, RealNetworks’ games business revenue rose 33 percent fromQ107 to $31.8 million. For 2007, games revenue was $108.5 million, up 26 percent over 2006. It has been buying online and mobile gaming firms, both studios and tech firms, consistently over the last two years…it already runs the consumer facing RealArcade business.

The company expects this transaction will be tax-free to its shareholders. The spinoff is conditioned on the board and SEC approving it, among other clearances, and the crucial “market conditions” factor…the IPO market for digital media companies isn’t the greatest at this point.

No other details were released, including questions such as who will run the business, what Rob Glaser’s continuing role will be. As for what will be left within the main RNWK company, the music part is already a JV between the company and MTV Networks (NYSE: VIA). Wondering if Glaser is finally open to selling off the enterprise video and mobile software side of the business…

More details in the release. Also, at this info site set up by the company.

Staci adds: During the earnings call, Glaser said the company has hired Lehman Bros to help it decide whether it’s more advantageous to do an IPO and then distribute remaining shares to RNWK shareholders or to do the spin in one step. Either way, he believes the spinning out of the games business will “enhance the nimbleness” of both it and RNWK. Don’t look for fast answers: Glaser said they expect to file with the SEC “by the end of the year.”

2 Responses to “RealNetworks To Spin Off Its Game Business; May Do An IPO Of The New Company”

  1. Wow, other than inventing spyware and Glaser being arrogant and failing to sell when Mark Cuban did, this will leave Real's legacy as what exactly? Bejeweled? Sudoku? The fact that their only successful business units were bought and not made in house? What a fall for a company that solved some truly difficult coding problems. Too bad they couldn't apply them…

    Earning interest on settlement money and games have been the only things that make money for real, and games is the only thing they are spending money on. It will be interesting to see which of the spawned off companies gets the cash that Real has been hoarding from the MSFT settlement, etc. Real has been moving their sever development overseas to India for the last two years, so maybe they have been preparing to ditch that end of the business for a while.