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Revenue gains but more losses for BBN

BBN, trading at close to its year low, grew in revenue but lost more than expected as the company hones on the business market.

BBN reported a 45 percent increase in revenues in its fourth quarter, but still lost $12.4 million or 62 cents a share on $68.7 million in sales.

Wall Street had expected the revenue gain, but the loss was larger than the consensus estimate of 49 cents a share. BBN stock closed 87 cents lower today at $18.37.

For the year, BBN, which provides high-speed Internet connections for businesses, lost $56.4 million, including a $20.7 million write-off for its April reorganization, on revenues of $234.3 million, a 33 percent sales gain over the prior year.

"They are smart people who have made wonderful breakthroughs that were great for the development of the Internet, but really now is the time to start focusing on generating profits for shareholders," said analyst Arthur Newman, who follows Internet stocks for Gerard Klauer Mattison, New York. "That involves not just a change in operating direction but a refocusing of the corporate culture."

Internet activities, where BBN is putting increasing emphasis, more than tripled from $8 million to $25.6 million in the fourth quarter, including a network management contract with America Online.

To underscore its Net focus, BBN earlier this week completed the divestiture of its majority interest in BBN Domain, producing a $20 million gain that will be counted as revenue in the current quarter. BBN retains about 15 percent ownership of the software unit, which has been renamed Domain Solutions.

Analyst Newman likes the prospects of BBN and other Internet access providers that focus on the business market, including UUNet (recently acquired by MFS Communications and PSINet.

All three of those firms also are wholesaling capacity on their national networks to regional Internet service providers like MindSpring Enterprises, EarthLink Network, and IDT. Wall Street generally disdains consumer-oriented carriers like that trio and Netcom, although BBN's stock is trading near its 52-week low too.

Most ISPs are viewed as potental takeover targets by telephone carriers interested in jump-starting their Internet access efforts, as MFS did with UUNet. BBN handles AT&T's consumer Internet service, WorldNet, and also has a cooperative relationship on the business side. AT&T owns a small percentage of BBN.