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PSINet loss less than anaysts predict

The Internet service provider reports earnings that exceed Wall Street expectations with a narrower-than-expected first-quarter loss.

Internet service provider PSINet today reported earnings that exceeded Wall Street expectations, posting a narrower-than-expected first-quarter loss.

While the company did experience a stronger quarter backed by newly acquired companies and investments, PSINet saw a wider loss in the first quarter compared to that of its year-ago period.

Shares of PSINet slid as much as 8.4 percent after the Internet company posted its first-quarter results.

The company reported a net loss of $59.3 million, or $1.11 a share, vs. a loss of $29.9 million, or 51 cents a share, a year earlier. Analysts polled by First Call projected a $1.20 per share loss.

The company said its EBITDA--which PSINet defines as losses before interest expense and interest income, taxes, depreciation, and amortization, and before charges for acquired in-process research and development--was $6.8 million for the quarter, vs. a loss of $10.5 million in its year-ago period.

Revenue for the quarter jumped 136 percent to $104.8 million compared with $44.5 million from a year ago.

PSINet CEO William Schrader said in a statement that the company's global customer base is approaching 60,000 business accounts and closing in on 1 million carrier customers. He added, "Our strong revenue growth, combined with our strategy of acquiring fiber bandwidth worldwide to reduce costs, continues to drive significant increases in shareholder value, as we move toward positive EBITDA."

As previously reported, after raising $1 billion in bond capital two years ago, the company set out on an international acquisition spree. After buying ISPs and fiber optic networks, the company claimed a "global reach" in competition with all but a few of the biggest telcos and communications companies.

PSINet is "aggressively" expanding its Web hosting business, COO Harold Wills said in a conference call to the public via a live Web broadcast. Wills said that into the second quarter, the company will be working with Hewlett-Packard; HP's servers will be used to power PSINet's Web hosting services, including email and messaging services. During the call, PSINet executives said they expect Web hosting revenue to increase about 20 percent through this year and into 2000, compared with 6 percent to 8 percent growth in that business in 1998.

The company also said it's building a 100,000-square-foot data center in London, which will become operational later this summer. Herndon, Virginia-based PSINet already has opened a Web hosting center in Virginia.

In the first quarter, the company launched its InterSky product, a wireless Internet access service. The company said the product is available in seven U.S. cities and will be rolled out to additional U.S cities and overseas by the end of the year.

With its DSL services agreement with Covad Communications set to be announced in the upcoming quarter, PSINet executives said they already have more than 100 customers using the service and have not received any complaints or cancellations to this date. They project that they will reach at least 18 to 20 cities by the end of 1999 with the Covad DSL agreement.

Yesterday the company announced its acquisitions of two privately held Brazilian firms in a move to enter Latin American markets, according to Reuters. The company bought Openlink and Horizontes Internet of Brazil, making PSINet one of the top five Internet service providers in Brazil. Over the last year, PSINet has acquired more than 20 regional Internet service companies in Europe, Asia, and North America, Reuters noted.

"During the quarter, we substantially completed integrating all of our newly acquired subsidiaries," Wills said in a statement. "We expect to increase our acquisition activities in 1999, enhancing our market position in the top telecommunications markets around the globe."

Said Schrader, "Normally, we're going to continue acquiring companies and investing in fiber and data centers." He added that PSINet plans to invest "heavily" in data centers in the near term.