RealTime IT News

EarthLink Pushes Broadband, Deals with Retailer

EarthLink Inc. on Tuesday said it is gaining broadband customers, just as it sees growing defections from its dial-up subscriber network.

To stem some of the effects of that churn, EarthLink also made another announcement saying it has selected Circuit City for "national retail distribution" of its dial-up business.

The Atlanta-based ISP on Tuesday issued its second-quarter financial results, posting a smaller than expected loss. The ISP cut its costs, but broadband growth was tempered by the dial-up slump. The company trimmed it outlook for the future.

EarthLink said revenues grew to $352.3 million, or 5 percent, which was slightly less than Wall Street analysts expected. EarthLink said its second quarter net loss was $15.3 million, or 10 cents a share, compared to a loss of $40.4 million, or 27 cents a share, for the same period last year.

EarthLink said it expects to post a 2003 net loss of $86 million to $100 million. For the third quarter, the company expects total subscribers to grow at similar to the performance in the second quarter with revenue totaling $350 million, compared with average analysts' estimates of $361.1 million. EarthLink also said it is cutting its revenue outlook to about $1.4 billion, from its April outlook of $1.44 billion to $1.5 billion.

EarthLink said its total online subscriber base rose close to 4 percent from a year ago to 5 million. The company said they have added 102,000 broadband subscribers, which amounted to a 64-percent increase, bringing its total to 993,000.

EarthLink said it expects to add 230,000 to 280,000 broadband subscribers by the end of 2003, which would bring its total to between 5 to 5.15 million total subscribers. That estimate is a revision of an earlier forecast of between 5.1 million to 5.3 million broadband subscribers.

"Broadband revenues grew 53.0 percent over the second quarter of 2002 to $88.5 million and now represent 25.1 percent of EarthLink's total revenues. Narrowband revenues were $245.4 million in the quarter, down 5.9 percent from the prior year quarter, due to a decline in traditional dial-up subscribers," EarthLink said in its statement of financial results in the quarter ending June 30, 2003.

EarthLink said the total number of dial-up subscribers fell by 4.9 percent bringing the total to 3.9 million subscribers. The drop in dial-up subscriptions may be driving EarthLink to improve its "narrowband" marketing.

PeoplePC Online, the company's value-priced narrowband service, added approximately 78,000 subscribers to end the second quarter with 197,000 subscribers while the traditional premium narrowband subscriber base shrank 3.9 percent in the quarter.

"This slight uptick reflects early-life churn from the high level of subscriber additions in the first quarter and an increase in narrowband subscribers leaving for broadband over the past year," EarthLink said in its earnings statement.

To help fight the churn, EarthLink struck the deal with Circuit City to aid its dial-up business. The new agreement calls for distribution of EarthLink Dial-Up Internet service through in-store disks as well as in-store presence in their personal computing area.

EarthLink will also launch with a consumer promotion that offers Circuit City shoppers a $50 Circuit City gift card when they sign up for six months of EarthLink service.

As a part of a prior agreement, customers can still sign up for broadband service in select Circuit City locations, EarthLink said in a press release.

EarthLink also said it is adding "web acceleration" to its EarthLink Unlimited, which the company says boosts dial-up speeds by up to five times. EarthLink said the faster dial-up service will be available in the third quarter.

Rob Kaiser, EarthLink's vice president of narrowband marketing said in a press release that "our dial-up customers will now be able to surf the Web up to five times faster than regular narrowband services at EarthLink's standard $21.95-a-month price."

Other EarthLink Unlimited services include EarthLink's Total Access. 2003 software, which contains Pop-Up Blocker and spamBlocker, instant messaging, 8 email addresses, 10 MB of Web-space and a customizable Personal Start Page, the company said in a statement.

Among the pitfalls to watch out for, EarthLink said, is an ongoing renegotiations with Charter Communications for a broadband cable deal, which could negatively impact EarthLink's results.