RealNetworks’ stock slides on planned charges

Shares of RealNetworks Inc. nosed downward after the company said it will be in line with quarterly revenue expectations but swallow nearly $250 million in charges.
The Seattle-based firm said next week’s earnings report will include $151 million to $153 million in fourth-quarter revenue, in line with guidance issued in October.
But RealNetworks also outlined four separate charges, saying it expects to write down $227 million to $249 million for the period. In addition to a non-cash charge of a whopping $185 million to $200 million for impairment of goodwill and acquired intangible assets, RealNetworks said it will take a $6 million hit to reflect fourth-quarter layoffs related to a postponed attempt to spin off its games business; a $20 million charge to write off certain deferred project costs and pre-paid royalties; and a non-cash charge of $16 million to $23 million to reflect an increase in the valuation allowance for deferred tax assets.
Only $4 million to $5 million of the charges are expected to result in a use of cash in future quarters.
The firm also said it will exclude the 2007 sale of 49% of Rhapsody America in the fourth-quarter earnings report “due to declines in market valuations and, therefore, a decline in the assumed valuation of the Rhapsody America venture.” The joint venture, of which RealNetworks holds 51%, offers a full-track download service to mobile users through a collaboration with Verizon Wireless.
Although RealNetworks has been active in a number of mobile efforts recently – including the acquisition of Sony NetServices for $9 million in 2007 and its $350 million pick-up of WiderThan Co. Ltd., a Korean mobile entertainment company – the company may be well-positioned to weather the current economic storm. The firm ended the year with $370 million in cash and cash equivalents, and it has streamlined operations in the last two months by slashing roughly 150 jobs.
RealNetworks were down 10 cents, or 3%, to $2.97 by mid-Tuesday following the pre-earnings release.