Parks Associates Blog

Thursday, May 08, 2008

Real Networks Sets Free Its Gaming Business

Along with releasing results of a great first quarter for its gaming division ($32 million in revenue, up 33% YOY), Real Networks just announced its plans to spin off its expanding casual gaming business division. According to the announcement, the company "intends to separate its global casual games business into an independent company and distribute shares of the newly created games company to its shareholders. RealNetworks may precede the spin off with an initial public offering and sale of up to 20% of the shares of the new games company."

Regarding the rationale behind this move, the company cited a couple of reasons:
"The company anticipates that spinning off its casual games business will result in two more flexible and focused companies. In addition, the separation will provide the games business an industry-specific currency for future acquisitions and enhance its ability to attract and retain the best talent in the industry."

"For investors, RealNetworks anticipates that the spin-off will create a pure-play casual games business with increased transparency, and that it will result in lower complexity in understanding and tracking RealNetworks' performance. We also think that the new structure will provide current and potential shareholders with two attractive investment options that are more closely aligned with their various investment objectives."

Real Networks apparently believes its gaming business, which has a much faster growth rate than all its other divisions, is undervalued. I guess this also means that the gaming people at RealNetworks won't have to explain gaming to top management who may not fully understand the potential of the business. The division did experience some retention issues of key executives lately.

An interesting side-effect of this spin off is that a pure play gaming company spun off Real Networks will provide the financial community good benchmarks for evaluating casual gaming companies. Who's next to go IPO? I-Play (formerly known as Oberon Media)? Bigfish Games? Wild Tangent? Popcap? It's about time.

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