Real Networks (RNWK) this afternoon announced that the company plans to spin-off its casual games business as an independent company. Real said it will distribute the shares to current holders, but may first conduct an IPO for up to 20% of the unit’s stock.

Real said the games business in the first quarter had revenue of $31.8 million, up 33% year over year. The company said it will determine specifically how to proceed by the end of the year.

Meanwhile, Real posted better-than-expected results for Q1. Revenues of $147.6 million beat the Street consensus of $141.2 million. The company had a profit of 2 cents a share, a nickel better than the Street consensus view for a loss of 3 cents. Real said that in addition to the strong growth in games, it had a 12% rise in its music business, a 15% increase in its technology products and solutions unit and a 2% drop in its media software and services segment. Gross margin of 62% was down from 65% a year earlier.

For Q2, the company sees revenue of $151 million to $155 million, including $4 million from its recent acquisition of the Trymedia division from Macromedia (MACR). The company expects GAAP net income to range from a loss of 4 cents a share to break even. The Street has been looking for $150.3 million with a loss of two cents.

For the full year, Real sees revenue of $628 million to $643 million, including $12 million from Trymedia; the company expects GAAP net income to range from a loss of five cents to break even. The Street has been looking for $623 million and a loss of 6 cents a share.

The company also announced a $50 million stock repurchase plan.

In after hours trading, RNWK is up 62 cents, or 9.6%, to $7.10.

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