RealNetwork Buys MP3 Company Xing

Talk about streaming media software company RealNetworks (Nasdaq: RNWK) being acquired by another company has been rampant recently, with Yahoo!’s (Nasdaq: YHOO) $6 billion purchase of Broadcast.com (Nasdaq: BCST) fueling more speculation about the next power play in the industry. But RealNetworks executives have insisted the company isn’t looking to be bought, and for now, the company seems to be concentrating on buying on other companies.

On Tuesday, RealNetworks announced that it has signed a deal to acquire privately held Xing Technology, a leading developer and provider of MP3 software.

“With the acquisition of Xing, RealNetworks can now better serve the huge market of new artists choosing to use MP3 to legally distribute their work,” said Rob Glaser, founder and CEO of RealNetworks.

The deal will be made with stock, which will be worth a maximum of $75 million. The acquisition, which will be accounted for as a pooling of interests, will likely be completed in the third quarter of 1999. RealNetworks expects to record a one-time charge for the acquisition.

About Xing

Xing manufactures and sells streaming audio and video encoders and players. Xing is now focusing primarily on digital audio and particular the MP3 format. The company is currently working on integrating MP3 into its consumer-based products and should benefit from RealNetwork’s more than 50 million registered users. Last year, Xing released the XingMP3 product line, a collection of tools for creation and delivery of high-quality MP3 audio.

Xing’s core engineering team will remain in its offices in San Luis Obispo, California, which will become a RealNetworks development facility.

RealNetworks Joins IBM

Tuesday’s deal comes one day after RealNetworks and IBM (NYSE: IBM) announced a partnership to create a universal standard for digital distribution of music. The companies will integrate RealNetworks’ client technology and encoding tools into IBM’s Electronic Music Management System (EMMS), which was developed for the preparation and distribution of all forms of digital content, including music.

EMMS will be used this spring by BMG, EMI, Sony Music, Universal Music and Warner Music to conduct the first-ever market trial of a system that combines security features with convenient and fast distribution of full-length, CD-quality albums to consumers.

In related news, Microsoft is set to release MS Audio 4.0, which will be an alternative to the MP3 format, today.

Stock Impact

RealNetworks stock has been rising fast since the Yahoo!-Broadcast.com deal was announced, and the stock has been buoyed by the new deals with IBM and Xing. Shares of RealNetworks were up 9-3/4 to an all-time high of 256-3/4 in early trading today. On Tuesday, RealNetworks rocketed up nearly 20 percent, rising 39-1/2 to close at 247 after news of the IBM deal.

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