Progressive Networks gets real

Call it a busy day for Progressive Networks.

It changed its name to RealNetworks and announced plans to launch an initial public offering.

RealNetworks marks the latest tech company to announce plans for an IPO, following on the heels of other companies that have jumped on the increasingly hot tech-IPO market of late. Network Solutions (NSOL), for example, went public today with a strong performance out of the chute.

RealNetworks, a pioneer in producing software for streaming audio and video on Web sites, did not list the number of shares offered or initial pricing per share in its filing with the Securities and Exchange Commission today.

But the filing did offer a peek at the company's financial performance as well as its relationship with software giant Microsoft (MSFT).

RealNetworks posted a nearly threefold increase in quarterly revenues, to $7 million in the period ending June 30, up from $2.5 million a year ago. And during this time, its net loss grew to $2.7 million, from $956,000 a year ago. Last year the company generated annual revenues of $14 million and took a loss of $3.8 million.

Software licensing fees brought home the bulk of the bacon, with $10 million generated during the first six months of this year, followed by service revenues at a distant second with $2.2 million, and advertising fees third with $1 million.

And in a year's time, software licensing fees grew 167 percent from the first half of this year over last. RealNetworks attributed the growth to acceptance of its server and player products on the heels of its introduction of RealPlayer Plus in August of last year and RealVideo earlier this year.

Server product sales grew to $5.5 million during the first six months of this year, over $3.6 million last year. And Player product sales rose to $4.6 million in the first half of this year, compared with $152,000 last year.

The company said it typically operates with little to no backlog and tends to get a substantial portion of its revenues during the last month of each quarter.

Since the company's founding in 1994, RealNetworks estimates that 18 million copies of its free RealPlayer software have been downloaded, and that over 200,000 copies of RealPlayer Plus have sold electronically since the product's first year of distribution.

RealNetworks' interest in raising capital comes at a time when it has an accumulated deficit of $12.4 million (as of June 30) and when competition in the streaming media is gaining steam.

The company cited Microsoft's recent acquisition of VXtreme, a direct competitor of RealNetworks, as an example.

Even though Microsoft took a minority investment stake in RealNetworks last July, RealNetworks has concerns that its investor will dramatically increase competitive pressure in the streaming media software market. That may lead to pricing pressure and longer sales cycles, and could curtail RealNetworks' market share, the company said in its filing.

But, possibly more importantly, RealNetworks fears Microsoft will incorporate streaming media technology into its Web browser software and server software offerings at no additional cost to the user.

Finally, another concern is that Microsoft will promote technologies that are not compatible with RealNetwork's products. Microsoft is looking to develop its NetShow client-server package into a single streaming video format standard, which the company previously said it hopes will help "grow the market."

Meanwhile, in its own deal with Microsoft, RealNetworks has granted the software giant a nonexclusive license to some of its source code for its RealAudio and RealVideo Version 4.0, as well as access to some patents. And, under some circumstances, Microsoft can sublicense the technology to third parties.

RealNetworks plans to trade under "RNWK" on Nasdaq. Its underwriters are Goldman Sachs, Montgomery Securities and Robertson Stephens.