RealNetworks Earnings Expectations (RNWK, TIVO, VIA)

RealNetworks Inc. (NASDAQ:RNWK) is set to report earnings after today’s close.  First Call has estimates at -$0.01 EPS on revenues of $143.4 million, but there are some estimates with a break-even to even a slight positive earnings for the quarter.  Estimates for next quarter are $0.02 EPS on $158.1 million in revenues.

It looks like the average analyst target is still over $10, but there have not been any major calls on today’s expectations.  Morgan Keegan started this with an Outperform rating back in September and J.P. Morgan just initiated coverage earlier in October with a "Neutral" rating.  Options are hard to use for any real indicator ahead of earnings and the open interest is not even worth noting.  The stock has spent most of the last three-months in a $6 to $7 trading band, and it has been in a $5.45 to $12.08 trading range over the last 52-weeks.

This company would have been easy to attack ahead based on the fact that recent earnings have been skewed by one-time payments that are not going out indefinitely into the future.  This will make comparisons to past quarters quite difficult.   The good news is that the company has become more and more prominent in digital music downloads via its Rhapsody joint venture with Viacom (NYSE:VIA) and its recent TiVo (NASDAQ:TIVO) pact.  Another interesting push here for looking ahead is its recent casual gaming infrastructure company called Game Trust.

One key issue is this huge short interest of 7.729 million shares as of mid-October.  Shares are flat mid-day ahead of earnings and RealNetworks carries roughly a $987 million market cap.  As of last quarter the company had almost $615 million in cash and equivalents and its net tangible assets after removing goodwill and other items was listed as $489.6 million.

Jon C. Ogg
October 30, 2007