The plummeting value of RealNetworks' stock has reinforced fears that online advertising revenues are falling across the board.
RealNetworks' share price plunged by 30 per cent, to a new year-low of $16.5625 per share, before a late-afternoon rally, to close at $20.625. Trading volume was 13.9 million shares, a large number for a company that usually sees about 2.3 million shares change hands each day.
Products Seattle-based RealNetworks makes the popular RealPlayer software for Net audio and video broadcasts. The player has "channels" that, when clicked on, take Web surfers to an advertiser's site.
David Bench, an analyst with Arnhold & S Bleichroeder, said: "I think many portfolio managers are pressing the panic button and are looking to raise some cash. But they are overlooking the long-term strength of this company."
Cause The forecast of Real’s advertising revenue was precipitated by the disappointing earnings of online-advertising company DoubleClick, and speculation that Internet portal Yahoo faced a softening ad market.
Heath Terry, an analyst with CS First Boston in San Francisco, said: "RealNetworks at $17 a share is ludicrous. This time next week, $17 is going to look like a gift."
Analysts said Real's advertising revenue is not under serious threat because, unlike Yahoo, which runs simple banner ads mostly from other online companies, Real's clients include established players, such as Time Warner, CNN and Comedy Central.
Ad sales make up about 20 per cent of Real's total revenues.
Bench says that Real still has an edge in the more lucrative market for the server software that runs the powerful machines that broadcast audio and video to end-user PCs. He adds: "The key is really what servers you are on, not what PCs you are on. Even though Microsoft is making strides on the PC, it's not on the servers yet."