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RealTime IT News

Prodigy Still Revving Up

Prodigy Communications Corp. was one of a handful of companies that pioneered the ISP industry and then languished as competitor America Online -- now a subsidiary of the AOL Time Warner juggernaut -- steamrolled the competition. But as Prodigy contemplates becoming a wholly-owned subsidiary of SBC Communications Inc. , the company is showing a new, rejuvenated face ready to deliver value to its potential parent.

Prodigy Friday announced its third quarter 2001 results amid praise from analysts who congratulated the company for a "strong quarter."

Unlike many competitors -- especially in the DSL space -- who have been forced to face bankruptcy and even dissolution in the wake of the tech bubble burst, Prodigy has been rolling ahead since the first quarter. Prodigy was cash flow positive in the third quarter, even managing to pay down its debt by $5 million, and increased its EBITDA by 36 percent (to $18.3 million) over the second quarter ($13.5 million). Net loss for the quarter, including minority interest, declined to $29.1 million (a loss of 41 cents per share) from a second quarter net loss of $32.4 million (46 cents per share).

"Prodigy is a strong turnaround story," said Chairman Charles Foster. "We have dramatically improved our financial performance, controlled expenses, added customers and forecasted stronger-than-expected results for 2002."

Prodigy's gains were built primarily on its increasing dial-up and DSL subscriber base. The company ended the quarter with more than 3.5 million owned and managed subscribers -- including about 980,000 DSL subscribers, 1.8 million dial-up subscribers and 740,000 managed Telmex subscribers. The total figure is up about 200,000 from second quarter subscriber totals of 3.3 million. The bulk of new subscribers came in the DSL category. Prodigy said it added 120,000 DSL subscribers during the quarter.

To help boost revenue from dial-up subscribers, on Oct. 1 the company raised the price of its unlimited dial-up service to $21.95 per month from $19.95 per month. President Paul Roth said impact on churn from the price increase -- the first in six years -- has been minimal. He noted that AOL's subscription price remains $2 higher.

As many others in the industry have experienced, revenues from advertising and e-commerce came in dramatically lower than in past quarters. Chief Financial Officer Allen Craft said revenue in that area were almost $1 million lower.

Craft also said Prodigy expects to continue its gains in the fourth quarter and into 2002. He said the company expects total revenue for 2001 to be in the range of $360 million to $370 million with an EBITDA in the range of $52 million to $55 million. Net loss for the year is expected to be between $128 million and $130 million. In 2002, Craft predicted net revenue in the range of $455 million to $480 million and EBITDA of $90 million to $95 million.

The company is also looking forward to the launch of Prodigy 7.0. Prodigy will rollout the first phase, a completely redesigned Web site, on Nov. 1. The company plans to launch the software, which includes a number of broadband-specific features, later in the year.

"Our business model has proven to be quite effective," Roth said. He added, "We expect to maintain our leadership position as a national ISP as we launch Prodigy 7.0."

Little new was said about SBC's plan to acquire all 70.5 million outstanding shares of Prodigy Class A common stock. However, Foster noted, "We at Prodigy see this opportunity as a new chapter in our proud history of leadership and innovation in the development of the Internet, and a greater opportunity to deliver better service to our customers and to compete in today's ISP market."