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Covad beats estimates on strong DSL demand

The provider of high-speed Internet connections beats consensus estimates as its install base of customers surges by 48 percent in the quarter.

Covad Communications, a provider of high-speed Internet connections, today posted a wider second quarter loss that beat consensus estimates.

The company posted a net loss of $131.5 million, or 86 cents a share, compared with a net loss of $41.9 million, or 61 cents a share, for the same period a year ago.

Wall Street analysts had expected the company to lose $1 per share, according to a survey of estimates from First Call/Thomson Financial.

Quarterly revenue increased to $58.2 million from $10.8 million a year ago.

During the quarter, Covad, one of several upstart companies that provide digital subscriber line (DSL) connections, increased its total lines installed by 48 percent to 138,000 lines, up from 93,000 at the end of March.

Many analysts revised their DSL installation estimates downward slightly, to about 136,000 lines from 144,000, after Covad had minor trouble with a new automated installation and order fulfillment system earlier in the quarter. The new system is expected to significantly improve the process and allow the company to install more lines than ever before, executives said

Although profit margins have remained high, executives said they plan to embark on a cost cutting program.

"There has got to be 20 percent to 30 percent inefficiencies in any company that has grown as fast as ours," said Covad chief executive Bob Knowling.

Covad agreed to acquire BlueStar Communications earlier in the quarter.