EarthLink sales, earnings, subscribers drop

EarthLink reported on Tuesday lower sales and profits for the second quarter, though its earnings per share passed analysts' expectations.

For the quarter ended June 30, the Internet service provider earned $31.5 million, or 29 cents a share, compared with $50.6 million, or 45 cents a share, in the year-ago quarter.

Sales fell 24 percent to $185.6 million from $245.6 million in the year-ago quarter.

Analysts polled by First Call had forecast earnings of 26 cents a share on revenue of $186.5 million.

At quarter's end, EarthLink had 2.45 million subscribers, compared with 3.3 million at the end of the second quarter last year. That's a 26 percent drop.

EarthLink, however, was upbeat over customer retention. The company said that the number of subscribers lost in the second quarter dropped to 149,000 from 282,000 lost in the second quarter of 2008. Subscriber churn, which measures the number of people who exit the service over a given period, fell to 3.6 percent in the second quarter vs. 4.3 percent in the year-ago quarter.

Cost cuts aided EarthLink's bottom line, with total expenses for the second quarter declining to $54.9 million, down 34 percent from 2008's second quarter. The company has been trying to rein in costs since 2007.

Based on the quarter's results, EarthLink upped its financial forecast for 2009. It's looking at adjusted earnings of $235 million to $245 million for the year. That's up from its previous forecast of $220 million to $230 million.

Additionally, EarthLink declared the launch of a quarterly cash dividend of 14 cents a share on its common stock.

"The consistency of our operating performance over the past eight quarters and our confidence that the company's core business will continue to generate solid cash flow enables us to commence a quarterly dividend program that will return a meaningful amount of cash to shareholders," EarthLink CEO Rolla Huff said in a statement.

EarthLink also announced that Bradley Ferguson will become its chief financial officier, starting Saturday. Ferguson has been the company's controller and previously its vice president of commercial finance. Ferguson has been an EarthLink officer since its merger with MindSpring Enterprises in 2000 and was a MindSpring officer before that. Current CFO Kevin Dotts will leave the company in mid-September.

[monkeyfun14]

Dial up is fading into non existance which is why dial up companies are losing subscribers. They need to upgrade or forsee going out of business in the near future.

[monkeyfun14]

Nvm forgot they offered dsl now.

[meatlocker]

"Nvm forgot they offered dsl now."

"Now"? Earthlink has offered DSL for about 10 years. You fail.

[jumpjetta]

Yeah, I had my first Earthlink DSL account in 1998. I moved to Earthlink cable in 2004.

[monkeyfun14]

Earthlink only tends to advertise their dial up services...

[Random_Walk]

It gets even crazier - You could getEarthlink via wireless internet from 2000 - present, I believe (Sprint handles the front-end, Earthlink was the ISP, and you get an earthlink email address).

[baconstang]

Been using their DSL for over 6 years. Sadly it's over AT&T lines, which suck.

[InklingBooks]

I'm probably an illustration of the reason for their woes. I was getting Earthlink over Comcast when Comcast made an offer I couldn't refuse. Switch to Comcast with basic cable TV and for a year I'd get cable plus broadband for less than I was paying Earthlink for mere broadband. At the end of that year, I could drop the cable TV and still be paying less than Earthlink.

Earthlink will continue to slide until they come up with a useful add-on that makes their service competitive. Their best option might be an agreement with numerous paid providers at airports, Starbucks etc. to offer Earthlink subscribers with free WiFi on the go.

[baconstang]

Earthlink's customer service used to be great when it was domestic. Since it's gone offshore, it's almost useless.

[jkylander]

I used to be an Earthlink customer and while I still had dialup, it was fine. When I tried to get DSL, however, they made promises they didn't keep and every time I tried to get customer service on the line, I got someone in India I could barely understand. After several times scheduling DSL installation then not getting it, I dropped Earthink and went with ATT and couldn't be happier. At least the one time I've had trouble, I got someone that I could understand and who had the authority to help me.

[jwmpc]

I'll second the ATT superiority in service and price. Also dependability. Made the switch about a quarter ago so I'm not in these statistics, but my guess is that after Earthlink's failed bid to provide wireless networks for cities, they abandoned any investment in their infrastructure.

Before switch, video streaming was erratic and useless. Earthlink blamed my platform. After switch, video streaming from Hulu, Netflix and YouTube work flawlessly and the occasional dropped connection is reestablished immediately. ATT knows its stuff.

[BG174]

I don't want to bash Earthlink - I've never had a problem with their service - but I can't believe I'm still a member after 10+ years. The ONLY reason I pay them $9.95/month is to keep my email account, which is the address I've used for more than a decade for personal correspondence, on my resume, for most of my online accounts, etc.. It's how people know how to to reach me, and I don't even want to think about how long it would take me to send a change of address email to everyone who knows that address.

Still, paying $9.95/month for email with a 100 MB Inbox limit, a sub-par web-based interface and limited spam protection seems pretty ridiculous to me when I do think about it. With services like Gmail out there, it's getting harder and harder to justify the cost. I wish Earthlink had an option like AOL, where you can keep your account for free if you don't use them for internet access. (And if anyone knows how I can keep my Earthlink.net email address for less than $9.95/month, please reply to this post!) :-)

[Anubia2]

BG174, you're paying way too much! I use Earthlink Premium WebMail and only pay 3.95/mo.

However, I'm trying to deal with them now about being charged for Norton Security for another 3.95 that I NEVER signed up for. Waiting for a callback from a "supervisor" after not being able to understand "Tina" in India or wherever.

So, I may be leaving them for free webmail, which I already have, but don't use. Like you, I've had my earthlink addy for many years and have been willing to pay for it until now if they won't do anything to satisfy me.

[BG174]

Thanks, Anubia! I had no idea a rate like that was available. I'm going to contact Earthlink first thing tomorrow and find out more about this.

Sorry to hear about your Norton problem. Hope you're able to work it out.

Much appreciated....

[AppleSuxLeo]

Earthlink is known to be run by Scientologists.
Therefor the name change to FruitballLink.