EarthLink profits as subscriber loss slows slightly

Company beats expectations for the first quarter and continues to bring up profits even though it also continues to lose dial-up subscribers.

EarthLink beat analyst expectations for the first quarter of 2009 as fewer customers dumped its Internet service.

The company, which provides dial-up and broadband Internet service, said first quarter profits fell to $32.5 million, or 30 cents a share, from $51.7 million, or 47 cents a share, a year earlier. Revenue was down 24 percent to $199.1 million.

But these results beat analysts' expectations. Analysts polled by Reuters expected earnings of 27 cents a share, excluding exceptional items, on revenue of $202.4 million.

EarthLink is still losing dial-up Internet users. But it appears that rate is slowing. The company reported that its churn rate, or the rate at which people dump its service for something else, fell during the quarter to 3.9 percent from 4.9 percent a year ago.

That said, dial-up is not having some kind of revival due to the recession. EarthLink is still losing loads of customers. In fact, it lost a total of 160,000 consumer dial-up subscribers during the first quarter, which is more than 9 percent of its subscriber base. It finished the quarter with 1.59 million subscribers.

But this rate is certainly slower than it was a year ago. For the first quarter of 2008, EarthLink lost 256,000 dial-up subscribers, which accounted for 9.8 percent of it subscribers. As for growth, EarthLink added 116,000 new customers to its dial-up service in the first quarter of 2009, but this figure was relatively flat compared to fourth quarter of 2008.

The company underwent some major cuts to its business, beginning in 2007 and continuing through 2008. Top on his hit list was getting out of the citywide Wi-Fi business. EarthLink had led the charge in building Wi-Fi networks that blanketed cities, winning contracts in cities such as Anaheim, Calif., Houston, Philadelphia, and San Francisco. The company has since shut down those efforts. It also sold off its stake in the mobile virtual network operator, Helio, which has been bought by Virgin Mobile.

EarthLink also slashed its workforce and closed offices in Orlando, Fla.; Knoxville, Tenn.; Harrisburg, Pa.; and San Francisco. It consolidated offices in Atlanta and Pasadena, Calif.

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