EarthLink Inc. (Nasdaq: ELNK) and MindSpring (Nasdaq: MSPG) announced their combined quarterly results Monday, just after the two Internet Service Providers (ISPs) completed their merger Friday. The company said new partnerships, and growth in its narrowband and broadband businesses helped boost revenue.
Shares in the new company, called Earthlink, closed at 48 11/16 Friday. Both companies reported better-than-expected results in the third quarter.
On a pro-forma basis, EarthLink said fourth quarter revenue was $199.1 million. Net loss for the quarter was $25.9 million, 22 cents a share prior to acquisition-related costs. Gross margin for the fourth quarter increased from 64 to 65 percent, reflecting the company's continued reduction in costs. For the fourth quarter, EarthLink added 322,000 net members leaving the combined company with about 3.1 million members.
The combined company also reported year-end results; for 1999, combined revenue was $670.4 million. Net loss for the year was $25.4 million, or a net loss of less than 22 cents a share, prior to acquisition-related costs.
February 4, 2000, EarthLink completed its merger with MindSpring following approval by the shareholders of EarthLink and MindSpring. The merger has given the company more ammunition to compete with other ISPs such as AOL (NYSE: AOL) and Excite@Home (Nasdaq: ATHM). Earthlink said it plans to focus on four key areas of growth from which it plans to diversify its revenue base: narrowband; broadband; Web hosting; and content, commerce and advertising.
On a combined basis EarthLink's narrowband or dial up revenue was $170.8 million for the fourth quarter, up 11 percent over 1999's third quarter narrowband revenue of $154.4 million. Year over year, EarthLink's narrowband revenue was up 124 percent from $260.2 million in 1998 to $582.9 million in 1999.
The combined company's broadband revenue was up 12 percent over the third quarter to $7.3 million. With 25,000 broadband customers, a 77 percent increase over its third quarter customers, EarthLink is aggressively upgrading its narrowband members to high-speed access solutions, the company said. During the quarter, EarthLink also secured broadband partnerships with ABCNEWS.com, ESPN.com, FOXNews.com, FOXSports.com and ZDNet. (Ziff Davis owns ZDNet (NYSE: ZDZ), the parent of ZDII).
The company said it saw content, commerce and advertising revenue as a major contributing factor to overall business, and saw recent partnerships as a source of revenue growth.
During the fourth quarter, the company also released EarthLink 5.0, its next generation of software, and MindSpring launched its online business resources portal, mindspringbiz.com. MindSpring also announced a deal with Ravisent Technologies (Nasdaq: RVST) to deliver an Internet appliance that allows members to access the Internet and surf the Web without a computer. To attract new users getting online, EarthLink also partnered with Apple Computer (Nasdaq: AAPL), becoming the exclusive ISP for all Apple set-up programs in the U.S.
Other major broadband partners include Bell South (NYSE: BLS), Charter Communications (Nasdaq: CHTR), Covad (Nasdaq: COVD), GTEi, Knology, Sprint (NYSE: FON) and UUNet.