Shares of RealNetworks Inc. [RNWK] were up 13% early in Friday's session after the company reported earnings Thursday night. In addition to besting earnings estimates, the company said it would spin off its casual games business and most likely taking the unit public.

RealNetworks is best known for its Rhapsody music service and RealPlayer audio and video tool.  RealArcade and GameHouse Web sites provides downloads for hundreds of games, including Scrabble, Monopoly and Wheel of Fortune. The site was built largely through acquisitions. The spinoff comes after the casual games unit passed the all-important six-figure threshold. In 2007, the unit's revenues were $108.5 million, and they are on track to top that mark this year with first quarter revenues of $31.8 million versus $23.9 million for the year-ago period.

While an official decision has yet to be reached RealNetworks said the spinoff would likely be preceded by an initial public offering with sale of 20% of the unit. The company said it expects to file necessary paperwork with the SEC by the end of the year.

Pacific Growth Equities analyst Derrick Wood estimates the value of the casual games business at  $335 million to $450 million, or between $2.15 and $2.90 a share. In a research note, Wood said the spinoff would provide "greater operating flexibility and investor transparency." He places a $10 valuation on RealNetworks based on a sum-of-the-parts valuation. -- David Shabelman

See May 8 press release from RealNetworks
See May 8 post from mocoNews.net