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Technology Stocks : RealNetworks (NASDAQ:RNWK) -- Ignore unavailable to you. Want to Upgrade?

To: Steve Antonelli who wrote (1010)	7/30/1998 10:52:00 AM
From: Brad Rogers	Read Replies (1) \| Respond to of 5843

RealNetworks' Plan Backfires DAVID EINSTEIN ÿThursday,ÿJuly 30, 1998 ------------------------------------------------------------------------ Confronting Microsoft can be bad for your corporate health, as RealNetworks chief executive Rob Glaser is discovering. One week after he blasted the software giant for ''breaking'' his company's software, RealNetworks' stock has fallen 34 percent. RealNetworks is a pioneer of audio and video on the Internet. Its RealPlayer software, which is free, lets Web users get recordings and live broadcasts of news, sports, music and other entertainment. RealNetworks says its software has been downloaded more than 50 million times and holds a commanding 80 percent of the market. But now, Microsoft appears to have set its sights on the little Seattle- based company with a piece of software called the Windows Media Player. Glaser, a mild-mannered former Microsoft executive, told the Senate Judiciary Committee last Thursday that Microsoft's new software -- which also is free -- disables the latest version of the RealPlayer. In addition, Glaser complained that the Windows Media Player automatically replaces earlier versions of the RealPlayer in a PC, establishing itself as the default media viewer. If you want to use RealNetworks' software, you have to start it manually. Countering Glaser's main allegation with a surprise parry, Microsoft cited an independent study showing that the RealPlayer contains a bug that causes it to break itself. RealNetworks denied that, saying Microsoft's the one with the bug. The companies have been waging a public relations battle over the issue on their Web sites, www.real.com and www.microsoft.com. Glaser's accusations were supposed to give lawmakers ammunition for widening the government's antitrust probe of Microsoft. Unfortunately, they've backfired on RealNetworks by spooking investors, who seem to have concluded that broken software is a bad investment, regardless of who breaks it, and that Microsoft may begin to eat into RealNetworks' market share. Since last Wednesday, RealNetworks' stock has fallen $15. It closed down $1.13 yesterday at $29. The plunge has knocked the wind out of the company, which had been riding high since going public last November. Its shares, which initially were priced at $12.50, had climbed as high as $45 last Tuesday -- the same day it reported second-quarter revenues of $15 million, 115 percent higher than a year ago. Microsoft's critics will point to the battle with RealNetworks as a textbook case of how the Redmond, Wash.-based powerhouse subverts competition. Microsoft has been accused on several occasions of licensing another company's software then incorporating a version of the technology in Windows, the operating system that runs nine out of 10 new PCs. With RealNetworks, Microsoft both licensed the company's technology and invested in it, buying a 10 percent stake. Microsoft doesn't deny that its Windows Media Player usurps the operations of older versions of RealNetworks' software. And it doesn't apologize, either. In fact, it wants its software to replace most other media players, including the RealPlayer and Apple's QuickTime. ''Windows Media Player has all the features found in each of the other multimedia players, plus a whole lot more,'' the company boasts on its Web site. Glaser's big fear must be that Microsoft could use its control of Windows to do to RealNetworks what it already has done to Netscape Communications. After Microsoft began bundling its browser with Windows, Netscape's market share fell from 80 percent to less than 60. To hear Microsoft tell it, however, it's not out to ruin competitors, but rather trying to make life easier for consumers. In a letter that Microsoft posted yesterday on its Web site, Windows marketing executive Yusuf Mehdi urged Glaser to bury the hatchet and ''join Microsoft in returning to the mission that both companies share: 'providing great technology for consumers.' '' No doubt Glaser would like to put this episode behind him -- especially if it turns out that Microsoft is right and his software has a glitch. The question is, can he make peace with Microsoft and still keep his shirt? Get a printer-friendly version of this article MORE BIZ \| TECH SF Gate Business Stock updates, personal portfolio, resources ------------------------------------------------------------------------ Why huge corporate marriages are busting out all over. BofA execs exit as NationsBank flexes muscle. RealNetworks' plan backfires. Making meetings merry. The woman behind the Webbies. Apple's not out of the woods yet. ------------------------------------------------------------------------ Gate Tech exclusives: Honey, win me a big, fuzzy Tamagotchi. Ubiquity of computing or gadgets that get in the way? At new TV dawn, TV vet looks back. ON THE GATE c1998 San Francisco Chronicleÿ PageÿD1