EarthLink (Nasdaq: ELNK), the second largest Internet service provider in the U.S., reported Wednesday a first quarter net loss excluding charges of $50.9 million, or 43 cents a share, on sales of $219.7 million. The results topped First Call consensus estimates, which called for a loss of 49 cents a share.
Revenue, with the recently acquired MindSpring in the fold, surged from $129.9 million from a year ago. Including merger and acquisition costs, EarthLink lost $111.8 million, or 95 cents a share. The company isn't projected to be profitable until 2002, according to First Call.
As of March 31, EarthLink had about 3.46 million subscribers, up 54 percent from a year ago and 11 percent from 3.12 million subscribers at the end of the fourth quarter. Of the 3.46 million members, about 45,000 were broadband customers, the company said.
EarthLink is playing in a land of giants. The company competes with AOL, AT&T (NYSE: T) and Microsoft's (Nasdaq: MSFT) MSN services. In addition, EarthLink battles Prodigy Communications (Nasdaq: PRGY), a host of Baby Bells offering Internet service, and free services from portals such as Yahoo! (Nasdaq: YHOO), Lycos (Nasdaq: LCOS), CMGI's (Nasdaq: CMGI) AltaVista and NetZero (Nasdaq: NZRO).
EarthLink's results come just hours after America Online (NYSE: AOL) reported a stellar March quarter. AOL's core service added 1.7 million members to boost its total subscriber base to 22.2 million. The Compuserve 2000 brand picked up 373,000 members to reach 2.7 million. Gateway.net gained 100,000 subscribers to reach 850,000 total.
EarthLink's strategy is to bring in dial-up customers and migrate them to broadband services. Narrowband revenue, however, accounted for 85 percent of sales in the first quarter. Broadband accounted for 4 percent of revenue. Web hosting and content, commerce and advertising accounted for the remainder of sales.
As for the outlook, EarthLink said it is on track to have 4.5 million members and $1 billion in revenue.
Thirteen analysts rate EarthLink at least a "buy" with two calling the stock a "hold." The stock is trading well below a 52-week high of 76 11/16.