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ComputerWire: IT Industry Intelligence

RealNetworks Inc is laying off 11% of its staff as it tunes up its strategy to focus on its recently introduced Helix streaming media platform and RealOne consumer service. The company said it will record a restructuring charge of between $4m and $6m relating to the layoffs - 90 out of RealNetworks' current total of about 800 employees are going.

The main factor behind the reorganization is the slump in its software systems business. Sales of its streaming servers have been drooping for some time, but fell 36% in the second quarter 2002 compared to the year-ago quarter. The company faces severe competition from Microsoft Corp.

"The impact of the on-going turbulence in the telecommunications industry and the weak capital spending environment on our systems business has caused us to step back and thoroughly review our strategy and operations," said RealNetworks CEO Rob Glaser.

The company last month launched Helix, a bold attempt to halt the seemingly inevitable march of Microsoft into the leadership position by opening up source code to its prized streaming server. Helix also contained, for the first time, the ability to stream Windows Media files, which raised concern that Microsoft may legally challenge the offering.

The company has always had two main problems with Microsoft that affected its server sales. First, Windows 2000 and above servers come with built-in streaming support at no additional cost. Second, Microsoft will not license its Windows Media streaming protocols to third parties to incorporate in their streaming servers.

By sniffing Windows Media streams off the wire, RealNetworks was able to reconstruct the protocol and build a feature into its own server that could handle the streams. In scenarios where companies would previously deploy a RealServer and Windows, they will be able to use Helix Universal Server as a catchall for 50 file types.

A second strand of the Helix strategy sees the company open the source code to the underlying streaming engine. Under two licensing programs, developers will be able to release open source or commercial streaming servers. RealNetworks hopes this will drive the adoption of a standard platform not based on Windows Media.

The company also said yesterday that its international operations will now become focused around the two key areas of RealOne and Helix. The firm did not disclose where the layoffs will occur, what products if any are to be sacrificed, and a spokesperson did not return a call for comment by press time.

© ComputerWire

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