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NetZero beats Street but sales slip

NetZero managed to slip past analysts' estimates in its first quarter Wednesday despite the fact that its total sales slipped 12 percent from the prior quarter.

In the quarter, NetZero (Nasdaq: NZRO) lost $23.8 million, or 22 cents a share, on sales of $16.5 million.

First Call Corp. consensus expected it to lose 25 cents a share in the quarter.

Its shares closed up 41 cents to $1.88 ahead of the earnings report.

The $16.5 million in sales marks a 113 percent improvement from the year-ago quarter when it dropped $13.7 million on sales of $7.7 million.

However, NetZero posted a loss of $26 million, or 25 cents a share, on sales of $18.7 million in the fourth quarter.

In the quarter, it added 800,000, bringing its total registered user base to 5.7 million, up 185 percent from the year-ago quarter.

The stock, which moved as high as $40 a share in January, fell to an all-time low of $1.13 earlier this week.

Despite the sequential revenue dip, CEO Mark Goldston said he was bullish that the free ISP will be the last one standing due to its strong cash position. About 33 percent of its advertisers were non dot-com customers.

"Free Internet access is here to stay," he said during a conference call with analysts following the earnings report. "The market leader will be NetZero with $220 million in cash on the balance sheet."

However, NetZero didn't offer much guidance about future growth because of a shaky online ad environment. Officials said revenue would be flat in the December quarter, but losses would be in line with estimates.

"This is still an evolving business model and it's extremely difficult to provide guidance," said CFO Charles Hilliard.

Separately, NetZero said it will pay Freei Networks $5 million to acquire the rights to domain names such as, and

Analysts expect NetZero to post a loss of $1 a share in the fiscal year.

All five analysts following the stock rate it either a "buy" or "strong buy."