ZipRealty Inc. (Nasdaq: ZIPR) today announced third-quarter net income of $600,000, down from net income of $2.9 million in third-quarter 2005. For the first nine months of the year, ZipRealty reported a net loss of $386,000 compared with net income of $2.57 million for the first nine months of 2005.

Net income amounted to 3 cents per diluted share for the quarter ended Sept. 30, down from 8 cents per diluted share for the same period in 2005. On a pro forma basis, earnings per diluted share was 7 cents vs. earnings of 11 per diluted share in the same period last year.

The company also reported revenues of $26.2 million in the third quarter, a 7.3 percent decline compared with $28.2 million in third-quarter 2005. The value per share of ZipRealty stock fell 42 cents to $7.56 Thursday compared to the prior day’s close.

Richard Sommer, ZipRealty CEO, said in a statement, “We are pleased with our third-quarter results, which exceeded expectations, particularly in the context of continued challenging market conditions in the residential real estate sector. New markets performed well during the period, and we continued to enjoy efficiencies in our customer acquisition efforts.”

Sommer who joined the company about two months ago, also said, “I can say with confidence that ZipRealty is ideally positioned to succeed in the residential real estate industry. Although it will take some evaluation and investment, I am confident in the final outcome.”

Gary Beasley, president and chief financial officer, stated that the company plans to launch operations in Naples, Fla., and Tucson, Ariz., in the first quarter. “These are both attractive markets, in states where we currently operate. Therefore, we expect a relatively simple launch process, and financial returns consistent with other recently opened new markets,” he stated.

The company employed 1,747 ZipAgents as of Sept. 30, compared with 1,383 at the end of third-quarter 2005 and 1,669 at the close of second-quarter 2006.

ZipRealty also announced that the total value of real estate transactions closed decreased about 11.8 percent in the third quarter to $1.2 billion, compared with $1.36 billion in third-quarter 2005, while the number of transactions closed fell 6 percent to 3,467 compared to the same period last year.

Average net revenue per transaction was $7,332 for the quarter, which represents a 0.6 percent drop from $7,375 in the second quarter and a 1.9 percent decrease compared to net revenue per transaction in third-quarter 2005.

As of Sept. 30, 2006, the company had about $88.4 million worth of cash, cash equivalents and short-term investments, representing about $3.76 per diluted share, with no long-term debt, ZipRealty reported.

The company expects full-year 2006 revenues to range between $90 million and $92.5 million. At this revenue level, reported net loss per share for the full year is expected to be between 15 cents and 20 cents with a corresponding pro forma loss per share range of about 10 cents to 15 cents.

This guidance translates to an estimated fourth-quarter revenue range of $18 million to $20 million, a reported net loss per share of 13 cents to 18 cents, and a pro forma loss per share of 17 cents to 22 cents, according to the earnings announcement.

During the fourth quarter of fiscal year 2005, the company reversed its valuation allowance on deferred tax assets, according to the earnings report. After this reversal and the company’s adoption of a accounting standard FAS123, which relates to employee stock compensation plans, ZipRealty estimates that an effective 2006 income tax rate of about 32 percent will be recorded for book purposes, according to the report.

A replay of the company’s third-quarter earnings conference call is available by calling (888) 203-1112, password 5435390.

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