RealNetworks (RNWK) hit a 52-week low recently. The stock, at $7.71, is down about 35% in the last three months. DIVX, another provider of multimedia software is down about 30% over the same period, and at $18.65 is very near its low since going public.
Both companies are profitable. In the last quarter, Real had operating income of $52 million on revenue of $125 million. Divx (DIVX) had income of $7.4 million on revenue of $16.7 million. Both companies continue to grow.
What appears to have happened is a rising concern that, with software formats for devices as diverse as the iPod and satellite radio, market share and pricing for suppliers will come under increasing pressure.
And, the valuations are coming down. Divx now trades at about 10x sales. For RealNetworks that number is only 3x revenue. Content platforms still appear to carry higher valuations that the software that drives them. Even after a huge stock drop and massive losses, Sirius (SIRI) trades at over 7x sales. And, unlike Real and Divx, Sirius has never made a dime.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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