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Summary

  • Reports Q2 revenues of $40.8M compared to $49.9M in the same period last year. Net loss accelerated to $21M in the quarter compared to $18.5M in Q2 2013.
  • This confirms my short thesis from July 21 as losses and sales declines not only continue by they are increasing rapidly with no end in sight.
  • Cash burn looks to be an around $60M in 2014 as I anticipated, in line with my projections of running out of cash in the next 3 years.

On July 21 when RealNetworks (NASDAQ:RNWK) was trading at about $8 following a Stansberry Research newsletter promotion, I urged readers to use caution and stay away from this hyped stock. I hope people listened because today's earnings report is nothing less than an unmitigated disaster that proves that my original value trap thesis is even stronger than originally anticipated.

The Q2 report not only showed an 18.2% decline in YOY revenue, but net losses that exceeded over 50% of the meager sales. This is shockingly bad, even for RealNetworks. But what is even worse is that the interim CEO Rob Glaser, who was responsible for the insane losses over the past several years, is now rewarded with a permanent CEO position. What a joke this has become as RealNetworks is set to burn another $60M in 2014 and run out of cash within 2-3 years as I originally anticipated.

My original short thesis is confirmed by this report. I am more confident than ever that RealNetwork's stock will trade down to the $4 range within 2 years. This represents a decline of 50% from where I originally initiated my coverage.

Disclosure: The author has no positions in any stocks mentioned, but may initiate a short position in RNWK over the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Update: RealNetworks' Q2 Results Are As Bad As I Expected