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Wednesday, August 03, 2005

RealNetworks Bounce Underwhelms (RNWK)

Interesting, I thought RealNetworks would respond more favorably to the recent earnings release. In my mind, it really marked an acceleration of the business from the break-even stasis that it's been in for the last few quarters.
The lid on the cooker is undoubtedly competitive pressures from Yahoo!, and I think that they're a real concern. However, Real's growth was across all of its offerings (games, advertising, technology) - not just music. Additionally, Real has been aggressively marketing its product on television lately and I think that this will continue to add users in the face of Yahoo!'s lower pricing. Music services are still at the cross-over stage where you need to educate the incremental user (i.e. The horses need to be led to water.). I believe that while price matters, being very consumer friendly and advertising aggressively is more important at this stage.
Plus: Hey, RealNetworks actually posted up some cash flow from ops this quarter! Always a good sign.
In summary, I think Real will continue to bleed upwards here as we have a transfer of holders.

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