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RealNetworks Swings To A Small Profit; Facebook, iPhone Are ‘Revolutionizing’ Revenue Models

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RealNetworks (NSDQ: RNWK) surprised analysts with a small third quarter profit, due to cost cutting, but the company’s revenue dropped 8 percent. Sales at RealNetworks’ music, technology products and solutions, and games businesses all dropped, compared to a year ago. The only unit to post an increase in sales was its media software and services division, which includes RealPlayer Plus. Subscribers to the company’s Rhapsody music service dropped to 700,000 from 750,000 during the previous quarter.

The company also said it had appointed industry veteran Hank Skorny as its SVP of media cloud computing and services, as part of a new effort to create products and services that “leverage cloud computing to make digital media available to consumers whenever and wherever they want it.”

3Q 2008 3Q 2009 Estimate
EPS -$0.03 $0.01 -$0.06
Net Income -$4.5M $1.5M
Revenue $151.96M $140.3M $140.9M

Press release | Webcast (5 p.m. ET)

[David adds] Glaser led off the earnings call discussing how the emergence of Facebook and the iPhone (and iPod Touch) as mass products will have a “revolutionary” affect on the company’s ability to make money. He pointed to the creation and subsequent mass adoption of the personal computer in the early 1980s, followed by Windows and the web browser, made RealNetworks’ existence possible.

“The combination of those first three created the platform Real Networks was built on,” Glaser said. “The Facebook and iPhone are the fourth. We