Maybe all RealNetworks (NASDAQ:RNWK) needed was a little competition to get it going? After posting 11 consecutive quarterly losses back when there weren't a whole lot of players in the digital-music space, the music specialist has landed squarely in the black for the second-straight quarter. Earning $0.03 a share on a 26% spike in revenue is nice. Closing out the year with more than 2 million paying subscribers is even better.
This should have been a challenging year for the company. Apple Computer (NASDAQ:AAPL) continues to ride the iPod revolution through its iTunes storefront. Napster (NASDAQ:NAPS) kicked off the year with a costly Super Bowl ad campaign aimed at educating consumers about its Napster To Go service. Back in May, Yahoo! (NASDAQ:YHOO) dropped a bombshell when it launched an unlimited music service that offers many of the same features as Napster and RealNetworks' Rhapsody service at a discounted price.
The company's bottom-line revival comes at a time when it is ramping up its marketing spending as well as running up a legal tab in its antitrust litigation against Microsoft (NASDAQ:MSFT). That kind of flexibility is important because the battle for market share isn't going to come cheap.
Granted, RealNetworks is a cash-rich outfit. It won't be left smarting even if it goes through with a $75 million share buyback to take advantage of its historically cheap price.
The company is still looking to grow revenue by 21% to 25% this year. Earnings for all of 2005 are expected to come in between $0.06 and $0.08 a share. Those are figures worth watching because a price war or a pesky rival dropping out can skew the results one way or the other. For now, at least, there is harmony in the digital media giant's world.
Here are some other headlines from RealNetworks' past:
- The company's Rhapsody Blue announcement was more hype than substance.
- Still, it's a noble effort to try to win market share in the highly contested digital-music space.
- In January, it posted its 11th consecutive quarterly loss, though the red ink came with an asterisk.
Digital music is a high-growth industry -- just the kind of industry that is often explored in our Rule Breakers newsletter service. You can take a free trial subscription by clicking here.
Longtime Fool contributor Rick Munarriz wonders if Bohemians really dig Rhapsody. He does not own shares in any of the companies mentioned in this story. He is a member of the Rule Breakers analytical team, seeking out tomorrow's great growth stocks a day early.
