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ISPs see big losses

Compuserve, BBN, and Netcom say their quarterly profits are being squeezed due to problems ranging from late shipments to the cost of building up operations.

CompuServe (CSRV) and two other Internet companies said today that their quarterly profits are being squeezed due to problems ranging from late shipments to the cost of building up operations.

CompuServe, the second-largest online service, revised its second-quarter projections to reflect a larger loss than earlier announced. BBN (BBN), meanwhile, reported a widening first-quarter operating loss, and Netcom (NETC) posted a larger third-quarter loss than the previous year. Both companies attributed losses to increased costs in enlarging their operations.

CompuServe linked its expected loss to late shipment of the next generation of its online interface software. The financially troubled online service and Internet service provider said it will lose 22 to 27 cents per share for its fiscal second quarter, not the 10 to 15 cents per share loss as it previously estimated.

Analysts have forecast a quarterly loss of 14 cents a share, according to First Call, which compiles financial projections. The company will report the results during the week of November 18.

The CompuServe 3.0 user software, originally due in September, is being shipped this month to some 3 million users--both subscribers to its online service and to people who recently canceled the service, the company said. However, CompuServe added it does not expect the new software to affect its membership rolls and balance sheet during the current quarter.

The company hopes that the new product, which reportedly offers faster response times and is easier to use, will improve its profit margin and reduce customer defections. CompuServe signed up 350,000 new subscribers to its online service in August and September, yet its customer base continued its descending spiral, falling by 44,000 to just over 3 million. Still, combined subscriptions for its Sprynet Internet access service, Japanese operations, and several other services climbed to 5.3 million, up from 5.17 million two months ago.

CompuServe, which completed a restructuring this summer that resulted about 150 layoffs, posted a net loss of $29.6 million, or 32 cents a share, for its fiscal first quarter ending July 31. That compared with net income of $26.8 million, or 36 cents a share, for the same quarter of 1995.

BBN reported a first-quarter operating loss of $10.9 million, compared with a loss of $6.9 million a year ago. The increase in the operating loss was attributed largely to BBN's investment in expanding the network infrastructure and marketing for BBN Planet.

BBN Planet, an Internet services arm for businesses and organizations, accounts for 45 percent of the company's revenues and increase sales.

BBN posted a 48 percent increase in revenues to $74.3 million for the quarter ending September 30, up from the previous year. BBN Planet, meanwhile, saw its sales jump more than 200 percent to $32.7 million compared with the previous year.

Net earnings reached $9.3 million, its first profitable quarter in at least a year. The company reported a net loss of $8.7 million a year ago.

"In the first quarter, BBN achieved its objective of continued strong revenue growth, primarily driven by BBN Planet. Our strategy to focus on end-to-end Internet services to businesses and organizations is enabling us to grow rapidly," said George Conrades, chairman and chief executive, in a statement.

Netcom reported a net loss of $13.6 million, or $1.17 a share, compared with a smaller loss of $4.4 million, or 49 cents per share, a year ago. The company fared better than analysts estimates, which had projected the Internet service provider would post a loss of $1.24 per share, according to First Call.

Netcom attributed about 40 percent of the loss to the start-up of its international operations. But even factoring these in, Netcom's net earnings should have still been higher than the same period last year.

Revenues increased 14 percent to $32 million for the quarter, compared with a year ago. The company noted its subscriber growth rose 141 percent with an additional 83,000 customers, compared with the year earlier. Netcom subscriber base reached 562,000 during the quarter and the churn rate remained virtually unchanged, the company reported.