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Thursday, May 8, 2008 - Page updated at 01:46 PM

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RealNetworks spinning off casual-games unit into separate company

Seattle Times technology reporter

Seattle-based RealNetworks plans to spin off its casual games business as a separate public company, the company announced today.

RealNetworks may also make an initial public offering, selling up to 20 percent of the shares in the new games company.

The spinoff will make "two more flexible and focused companies," according to a news release from the company. Further, it would 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."

RealNetworks games business had sales of $31.8 million in the first quarter, up 33 percent from a year ago. Games revenue represented 21.6 percent $147.6 million in first quarter net revenue, which the company reported today. The company's other consumer businesses include music and media software and services.

It also sells mobile carrier application services, including ringback tones, music-on-demand and media delivery system software support.

RealNetwork's first-quarter net income was $2.4 million, or 2 cents a share. That's down from $40 million, or 22 cents a share in the year-ago period, but those results a $61 million payment from Microsoft. It was the final payment related to the companies' antitrust settlement and commercial agreements.

The spinoff of the games business still faces several hurdles and uncertainties, the company said.

The move requires final approval from RealNetworks' board, a registration statement, a favorable letter from Internal Revenue Service, as well as an opinion of a tax counsel. It would also be subject to "market conditions, the execution of inter-company agreements and other matters," RealNetworks said in the statement.

The company expects to file documents with the Securities and Exchange Commission by the end of this year.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

Copyright © 2008 The Seattle Times Company

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