It will distribute shares of the newly created games company to its shareholders, and may precede the spin off with an initial public offering and sale of up to 20 percent of the new entity.

RealNetworks, which has a catalog of more than 500 casual titles, recently announced its Q1 results, showing a 33 percent increase in games revenue to $31.8 million and a 14 percent growth in overall revenue to mmoabc47.6 million. Its 2007 games revenue totaled mmoabc08.5 million, up 26 percent from the previous year.

"RealNetworks was a pioneer and has been a leader in the casual games industry since we introduced RealArcade in 2001," said Rob Glaser, chairman and CEO of RealNetworks.

"We believe that spinning off our casual games business will give it the best opportunity to continue to flourish and lead."

The company said that spinning off its casual games business will result in two more flexible and focused companies. “In addition, the separation will provide the games business with an industry-specific currency for future acquisitions and enhance its ability to attract and retain the best talent in the industry,” it said in a statement.