hit analyst expectations for its second quarter, as it pared
away unprofitable and delinquent corporate accounts.
The corporate Internet service provider reported a net loss of $11.3
million, or 28 cents per share, for the quarter. That compares with the year-ago quarter's net
loss of $10.9 million, or 28 cents per share, which included a one-time gain of
$1.8 million, or 5 cents per share, from a sale of investments.
Revenue was $29.5 million, an increase of 46 percent over the
$20.2 million reported a year ago, and an increase of
15 percent over the $25.6 million reported in the previous quarter.
David Takata, an analyst with Gruntal &
Company said PSINet's results were better than his expectations, adding
that an expense control program launched by the company's chief financial
officer Ed Postal
is working. But Takata also said there is still more room to cut back on expenses--in marketing, for example.
During the quarter, the company launched a review of its customer base. It is trimming down unprofitable accounts or those with shaky
payment histories. This step has slowed growth of accounts, but those deals signed generate a higher level of revenues. The company had 21,900 current accounts as of June 30.
"Really what they are doing is focusing on where the opportunities are.
They are not AT&T (T), with unlimited resources, so they have to be more selective and
focus on growth," said Takata. The company is concentrating on the higher-end
businesses where they can generate revenue with Web hosting, e-commerce, and
faxing services. "The connectivity business alone would never get this
business to profitability."
Takata expects losses to continue for another year, but next quarter the
company should come just $500,000 shy of achieving a balanced
cash flow before interest, taxes, depreciation, and amortization--a
"They want to bring on value-added contracts and that will slow their growth
as they get more selective," Takata said. However, he added, that revenue
will continue to increase as it
offers those customers more services.
The company's stock gained about 3 percent in early trading from
yesterday's close of 7-7/8.