EarthLink earnings up, revenue down

EarthLink earnings dipped slightly in the fourth quarter, but rose for 2005 overall, the company reported today. Revenues were down for both the quarter and the year, however, as the company’s dial-up business continued to shrink and its new service initiatives did not make up the difference.

For the fourth quarter, EarthLink earned 22 cents per share or $29.2 million in net income, down from 23 cents per share a year ago. Its full-year net income was $142.8 million or $1.02 per share, up about 26%. As one of the few surviving ISPs, EarthLink continues to serve the shrinking dial-up Internet market, but has also made major initiatives in broadband, including two VoIP services, a wireless joint venture with SK Telecom called HELIO and a new municipal WiFi unit that landed contracts in Philadelphia and Anaheim. The company acquired an anti-spyware software firm and announced its planned acquisition of CLEC NewEdge Networks at year’s end.

“Last year, we had an ambitious agenda, and we delivered with a series of initiatives that are reshaping our position in the marketplace and redefining what it means to be an ISP," said Garry Betty, EarthLink's chief executive officer, in a prepared statement. “Building on the strength of our core access business, we are evolving into a total communications company that will deliver an expanding portfolio of voice, data and wireless services to residential and business customers.”

The company’s dial-up business continued to shrink as it shed 174,000 dial-up customers, while adding 104,000 customers to its low-end PeoplePC Online service. EarthLink ended 2005 with 1.2 million PeoplePC Online subscribers, 2.3 million premium narrowband subscribers, 1.6 million broadband subscribers and 127,000 web hosting accounts, the company said.Revenues from dial-up services remain EarthLink’s biggest source of income, although they fell more than 17% in the fourth quarter to $172.3 million.

Broadband revenues increased about five percent to $111.4 million in the fourth quarter but average revenue per user fell, the company said. EarthLink earned $29 million in the quarter from value-added services such as Web hosting and advertising, up 24 percent in the fourth quarter.For the year, total revenues were $1.3 billion, a decrease of 6.7 percent compared to 2004.

EarthLink officials attributed that decrease to price cuts for its DSL service and the growth in customers at the low end of its narrowband services. Broadband revenues for the fourth quarter were $111.4 million, an increase of 4.9 percent over the prior year quarter, resulting from the growth in broadband subscribers partially offset by a decline in overall broadband average revenue per user.

Web hosting, advertising and other value-added services revenues were $29.0 million, a 24.1 percent improvement compared to the prior year quarter, driven primarily by increases in search-related advertising revenues and ancillary services revenues, such as Internet Call Waiting and security-related services.