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RealNetworks, Cisco align
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June 11, 2001: 1:46 p.m. ET
Network gear maker agrees to distribute, re-sell media technology
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NEW YORK (CNNfn) - RealNetworks Inc. struck a key alliance Monday in its fight to remain the leading supplier of technology used to broadcast audio and video over the Internet.
The company, which claims its Internet audio and video technology is used by roughly 200 million people worldwide, said Cisco Systems, a top supplier of Internet networking equipment, will integrate RealNetworks' technology into its line of content networking products.
Under the terms of their agreement, Cisco will incorporate RealNetworks' RealSystem Server 8 and RealSystem Proxy 8, used to broadcast range of digital media formats, into its content networking products.
Cisco also has agreed to resell RealNetworks' streaming media technology platform, called RealSystem iQ, to its enterprise customers.
The deal with Cisco is RealNetworks' latest strategic move to thwart the advances of Microsoft, which has been trying to displace the company as the dominant streaming media technology provider with its Windows Media software.
Late last month, sources at America Online confirmed they are discussing a potential distribution deal with Microsoft under which its streaming media technology would be packaged with AOL's Internet service, where currently it has an exclusive arrangement with RealNetworks.
AOL is owned by AOL Time Warner, which also owns CNNfn.
"The significance of today's announcement is that both companies – Cisco, the architects of the Internet, and RealNetworks, the architects of digital media delivery – have put their collective insight, experience, and throw-weight back behind optimizing the delivery of digital media," Ben Rotholtz, general manager of products and systems at RealNetworks, told CNNfn.com.
By integrating RealSystem iQ, Cisco's business customers will be able to deliver streaming media using peer-to-peer networking, where each system on the networking acts as a server, while using Cisco's Content Distribution Manager and Content Engine products, the companies said.
Financial terms of the agreement were not disclosed.
Analysts said the deal, an example of how companies like RealNetworks are addressing the slowdown in the enterprise market resulting from the dot.com shakeout and growing economic uncertainty, could put the company in a strong position when the market turns for the better.
"When enterprise spending comes back, RealNetworks has a brand new channel to access customers," said Heath Terry, analyst at Credit Suisse First Boston.
"It gives them another reseller out there, and obviously Cisco has a big base of clients. Having Cisco selling your products is absolutely a positive," Terry added.
"It's significant for RealNetworks because it's a question of getting RealSystem iQ adopted by content providers, and this is one way to push it through," said David Bench, analyst at Arnold & S. Bleichroeder.
Shares of RealNetworks (CSCO: down $0.74 to $19.75, Research, Estimates) advanced in early Nasdaq trade Monday but then gave back their gains in the afternoon, hovering just below Friday's closing level. Cisco (CSCO: down $0.74 to $19.75, Research, Estimates) shares fell more sharply amid a broader downturn in the networking sector. 
-- Reuters contributed to this report.
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