Covad beats estimates, still posts loss

Weakened independent DSL provider Covad Communications reported first-quarter net losses yesterday of $198.5 million while more than tripling revenues compared to the same quarter last year.

The company’s first-quarter $1.15 loss per share managed to beat Wall Street’s expectations of a $1.35 loss per share, according to analysts polled by Thomson Financial/First Call. For the same period last year, Covad posted a net loss of $136.3 million, or 93 cents per share.

In a conference call to investors, Covad Chairman Chuck McMinn described the first quarter as a “new beginning,” and said the fourth quarter 2000 net loss of $907.5 million represented the “peak loss for the business.”

The heavy fourth quarter losses last year comprised the bulk of the 2000 financial train wreck that amounted to a $1.4 billion net loss for the company.

“We expect improvements from this point forward toward our profitability goal,” McMinn said. “While our goal is to aggressively improve the financial performance of the company wherever possible, you should not expect this kind of dramatic improvement every quarter.”

McMinn added that Covad has severed ties with a number of troubled ISPs, and the resulting number of disconnected lines in the second quarter 2001 will slow improvement.

Despite the loss, revenues continued to surge, jumping 242% to $71.2 million compared to $20.8 million in the first-quarter 2000. Quarter to quarter, revenues were up 29% from $55.2 million in the fourth quarter 2000.

According to Chief Financial Officer Mark Perry, Covad did not recognize $19.5 million in revenue billed to Internet service providers (ISPs) that could not offer “reasonable assurance” of payment.

The company still faces the threat of possible Nasdaq delisting. McMinn said a Nasdaq panel is considering the matter and Covad would continue providing information until a decision is reached.