EarthLink's up with PeoplePC

Internet service provider EarthLink said Monday that it will acquire PeoplePC in a deal valued at about $10 million.

Under the terms of the deal, EarthLink will offer $.0171 per outstanding PeoplePC share. The value of the deal could be raised to $14.3 million, or $.0245 a share, under certain conditions. EarthLink will also take on $35 million in deferred service liabilities to PeoplePC subscribers.

San Francisco-based PeoplePC, which sells low-cost computers with bundled Internet access, went public in August 2000, raising $85 million with shares priced at $10 a share, but investors were skeptical about the company's prospects almost from the start.

EarthLink CEO Garry Betty said in a statement that the PeoplePC acquisition will complement its current services and allow it to target "the value segment of the ISP market."

The Atlanta-based company will be able to run PeoplePC's business profitably given its lower telecommunications costs, Betty said. The acquisition isn't expected to harm financial results at ambitious EarthLink, which is known for providing no-frills, affordable service Internet service.

Youssef Squali, an analyst with First Albany, said the PeoplePC acquisition makes sense strategically. "This transaction makes sense as it allows EarthLink to tap the growing value ISP segment ($10 a month)," he said in a research note. "With the exception of broadband, the value segment is where growth has been in the last few quarters for the industry."

But Squali said the PeoplePC deal is still a small move in the value ISP market. "It represents EarthLink's toe-in-the-water effort in a market where United Online reigns king," he said.

Nick Grouf, PeoplePC's CEO, said it was clear that the company needed to be part of a bigger organization.

PeoplePC also needed cash. In a recent filing with the Securities and Exchange Commission, PeoplePC said its funds "may not be sufficient to fund operations for the remainder of 2002."

The company made a splash in its early days, signing deals with Ford Motor and Delta Air Lines to supply PCs to those companies' employees. But the dot-com crash in early 2000 diminished hopes for PeoplePC, which delayed its IPO and then had to slash its offering price. Shares went downhill from there, and the company was almost delisted from the Nasdaq.

As shares crumbled, PeoplePC continued to tweak its business. The company originally sold three-year memberships primarily to consumers, and in return, customers received a name-brand computer (replaced every three years) with a warranty, Internet access and admission to its buyer's club.

PeoplePC then switched to focus on companies and their employees, but Ford eventually scrapped its deal because of the weak economy. An agreement with credit card vendor MBNA to provide consumer financing to those interested in buying PeoplePC bundles was terminated May 17, according to the company.

PeoplePC did sign up other companies such as Severn Trent Water, England's largest independent water company, but said that financial woes hindered its efforts with big companies.

According to regulatory filings, PeoplePC had $11 million in cash and equivalents on March 31, half of its total just three months earlier. Nevertheless, it did improve its financial results. For the first quarter ended March 31, the company reported revenue of $48 million and a net loss of $8.8 million, an improvement from sales of $37 million and a net loss of $36 million a year ago.

EarthLink said that PeoplePC will give it 60,000 paying monthly subscribers and about 500,000 prepaid, bundled subscribers. EarthLink has about 4.9 million subscribers, the company said.

[ccochran40]

PeoplePC is stealing money from me every mth. I have canceled service via phone, via their Chat and directly on their website. I have tried repeatedly to get my card out of their system but it won't allow me to delete my card#. Below is the chat Log on 11/5, that demands that they cancel the account again, and I keep getting BS, ignored, and hungup on. They charged me again in Dec. I have sent msgs to Earthlinks BOD, Investor Relations, OR Dept of Justice and the Feds. I want my money back for all of it, they are taking it illegally.

November 5, 2010
Chat start time 1:02pm
Please wait for a site operator to respond.
'Llyod Travas' says: Thank you for contacting PeoplePC LiveChat, how may I help you today?
[e-mail]: I just logged into my bank account and the total I was charged was $22 why is this?
Llyod Travas: Sure I will help you with that.
[e-mail]: I canceled everything last month except basic Accelerated plan.
Llyod Travas: Okay.
Llyod Travas: To proceed I will need to verify the account.
Llyod Travas: What is your mother's middle name?
[e-mail]: Mae
Llyod Travas: Thank you for the verification.
Llyod Travas: Please give me three minutes to pull up your account.
[e-mail]: Every time I call or initiate a Chat with you guys, you are always trying to get me to buy some other service. I keep saying no!
[e-mail]: But then the next month, I get billed for something I never asked for!
[e-mail]: Just cancel this service and refund my $22+ now, today!
[e-mail]: I am calling my bank to block you guys from charging my account again.
Llyod Travas: Let me explain the charge to you for $22.36
Llyod Travas: Your monthly invoice is for $12.95
[e-mail]: No, I told the last person that I wanted nothing but basic srvc and I did not want the Security pack or any other garbage
Llyod Travas: You have PC fine tune added to your account on 10/07/10
[e-mail]: That's what I called and said I did not want or install because your security package is garbage, I had to have my computer rebuilt because none of your 'virus protection' crap ever worked on my machine.
Llyod Travas: So there was a charge for PC fine tune on pro rata basis and then the Actual charge for the PC fine tune.
[e-mail]: No, I called within days of getting that disc and told the person there I did not want it and did not install it...
Llyod Travas: Okay.
[e-mail]: No, refund my money and cancel the account. I can get better service for less elsewhere
Llyod Travas: Please stay online as I check the same.
[e-mail]: No, it's obvious that the idiot I talked to last time did not do as I told them too
Llyod Travas: I do understand your concern. Please allow me five minutes to resolve this issue for you.
[e-mail]: That's what the last person said, but obviously it wasn't true, otherwise this months charge would have been less
Llyod Travas: I apologize for the inconvenience caused to you. Just need five minutes [e-mail]: Just reverse this charge and cancel this account
Llyod Travas: Please let me check that for you.
[e-mail]: I keep getting that from you guy's, but just do as I say.
Llyod Travas: Please stay online as I am just going through your account details.
Llyod Travas: I see that your last contact was made for a issue on Security Pack.
[e-mail]: That is ********...
[e-mail]: The issue was, I didn't want it because I purchased and installed Norton's AntiVirus
[e-mail]: Because your service would not download antivirus database to my machine without blowing up; and my computer was full of virus' because of it
Llyod Travas: I am sorry for that.
[e-mail]: I called 2 days after getting that disc in the mail and said I did not want it and to not charge me for it
[e-mail]: It was all done by chat and the person who 'chatted' with me last time was an idiot
Llyod Travas: Please give me three minutes as I check
[e-mail]: Refund my money now and cancel this service
[e-mail]: I want a supervisor now! I want this charge cancelled now!
Llyod Travas: I apologize.
[e-mail]: I told them I did not want anything but basic accelerated service and that's what I meant
[e-mail]: I did not want Finetune or Security +; just basic service
Llyod Travas: Please give me three minutes to check on that.
[e-mail]: No, no, no
[e-mail]: I want this account canceled and the credit sent back to my bank
[e-mail]: enough, I am done here. I have this whole chat recorded, and I and sending it to my bank and the BBB.

Do not sign up with PeoplePC, Earthlink, or New Edge, they are all the same company and they will steal you blind.