Microsoft To Sell Its 10% Of RealNetworks

Microsoft says it will sell its 10% stake in streaming-mediadeveloper RealNetworks Inc., citing differences over product direction. Microsoft currently owns 3.3 million shares of the Seattle developer, which produces RealPlayer, software that competes with Microsoft's Windows Media Player.

Microsoft acquired its stake in RealNetworks in July 1997, when it signed a contract with RealNetworks to support the RealPlayer file formats in Windows Media Player. Soon after, Microsoft received code for RealPlayer 4.0 formats, and before the company could update Windows Media Player, RealNetworks changed file formats, making them incompatible with the earlier code, says Gary Schare, Microsoft's lead product manager for Windows media technologies.

By last spring, Microsoft had decided that the two companies were going in different directions and notified RealNetworks in June that it would dispose of its 10% stake. Schare says Microsoft notified the company before RealNetworks CEO Rob Glaser testified to the Senate Judiciary Committee in July that Microsoft intentionally disabled its RealPlayer software.

When RealNetworks wouldn't agree to a proposal made this fall to sell the shares as an underwritten secondary offering, Microsoft decided to sell the shares on the open market, Schare says. RealNetworks officials couldn't be reached for comment by press time.