On a day that saw its stock spike more than 15 percent on an analyst upgrade, RealNetworks reported today that strong digital music revenue and a cash settlement payment from Microsoft propelled it to strong fourth-quarter profits, reversing a net loss from a year ago.

For the quarter ended December 31, the digital media company posted a net income of $295.6 million, or $1.61 a share, a sharp uptick from a net loss of $1 million, or 1 cent a share, for the fourth quarter a year ago.

The company's revenue rose 15 percent to $83.6 million on increased subscriptions to its Rhapsody digital music service.

The numbers largely exceeded the expectations of Wall Street analysts, who had forecast a profit of $1.44 a share on sales of $85 million, according to a survey from Thomson Financial.

"2005 was a watershed year for RealNetworks," company CEO Rob Glaser said in a statement. "We achieved record annual revenue, returned the company to profitability, settled our antitrust litigation in a manner that generated significant shareholder value, and dramatically grew our games business through both organic growth and acquisitions."

Glaser said Rhapsody now has 1.4 million subscribers, up from 1.3 million at the end of the last quarter and double its numbers from a year ago.

Music revenue now accounts for 30 percent of the company's total revenue. In a deal the companies announced last October, Microsoft paid RealNetworks $478 million in cash during the quarter to settle an antitrust case over the software giant's decision to bundle Windows Media Player for free within the Windows operating system.

As part of that deal, Microsoft agreed to spend $301 million in promoting Rhapsody on its MSN Web site.

Real has seen consistent increases in its subscriber numbers, the company said.

The company forecast earnings per share to range between 11 cents to 13 cents on sales of between $82 million to $86 million.

At the conclusion of the quarter, Real said it had approximately $781.3 million in cash.

Shares in the company spiked more than 15 percent to $8.53 on the day after Piper Jaffray analyst Aaron Kessler upgraded the stock to outperform from market perform and raised his price target to $10. Shares have dipped nearly 4 percent in after-hours trading to $8.19.

Real also said today that it promoted vice president of finance Michael Eggers to chief financial officer, replacing Roy Goodman, who will remain with the company in a financial and investor relations capacity.