Real misses for Q1, swings to loss; mentions "Facet"

Real Networks today reported a first quarter loss of $12.1 million, or 10 cents a share, on sales of $140.8 million, a five percent drop from the year-ago quarter. In the year ago quarter, the company reported a net profit of $2.4 million, or 8 cents per share. (Statement)

Wall Street had been expecting a loss of 6 cents per share.

Real said that revenue from its music business grew 16 percent from the year ago quarter and the games business jumped 3 percent. But revenue dropped 15 percent in the Technology Products and Solutions division and 23 percent in Media Software and Services.

On a call with analysts today, CEO Rob Glaser said, "To be clear, I am not satisfied with these results, even considering the circumstances."

The company remains engaged in a legal battle with Hollywood movie studios over the RealDVD software and is still under a court-ordered injunction to not sell the product. The software allows users to make digital copies of their DVDs, much like music CDs are copied to iTunes. The studios have argued that it fuels unauthorized sharing and piracy.

Also see: RealDVD hearing: Don't block the software because of what-ifs

The court ruled last year, days after the software was released, to block the downloading of it because, if the court rules in favor of the studios, the copying of DVDs illegal, the damage would have already been done - damage that could not be reversed.

The two sides are expected to wrap up preliminary injunction hearings in the coming days and will await a judge's decision on that matter.

Glaser also noted that the company's latest effort, a device called Facet, was demonstrated in court last week. Facet, which appears to be Real's version of Apple TV, was described in court documents as a product that “shares many of the functionalities of RealDVD, including DVD playback from both a physical drive and from a secure digitally-stored copy of the DVD, i.e., Facet (the New Platform), so that both products could be adjudicated at once."

As for the company's financial outlook, the company did not provide guidance, saying that it "expects 2009 to be a challenging year for consumer spending, online advertising and corporate infrastructure spending." For the second quarter, Real expects overall revenue to decline year-over-year and to be flat-to-slightly down sequentially.

Shares of Real Networks slipped in regular trading, closing at $2.67.