ISPs to be judged on subscriber growth, new markets
By Reshma Kapadia
NEW YORK, Oct 20 (Reuters) - The "second-tier" U.S. Internet service providers that are jockeying for position behind industry leader America Online Inc. (NYSE:AOL) need to show progress toward profitability and expansion into new markets in their earnings reports, analysts said.
Subscriber growth at companies like ExciteAtHome Corp. (NASDAQ:ATHM), EarthLink Network Inc. (NASDAQ:ELNK), Juno Online Services Inc. (NASDAQ:JWEB) and NetZero Inc. (NASDAQ:NZRO) will be one of the key measures investors will be watching.
"ExciteAtHome's guidance previously was 400,000 (for subscriber growth) and they failed to hit (the target) in the second quarter so I think there is bit more focus on that this time around," said Doug Shapiro, analyst at Banc of America Montgomery. "It's much doable this quarter than last."
Wall Street analysts expect ExciteAtHome, which delivers high-speed Internet access and services over cable lines, to post a third-quarter loss of 10 cents a share and log revenue of $185.1 million, according to First Call/Thomson Financial.
It is expected to report results on Tuesday.
Analysts will also watch how the media business of ExciteAtHome weathers the decline in advertising spending that has clouded the growth outlook at even the largest Internet media players, including Yahoo Inc. (NASDAQ:YHOO).
Of all the second-tier Internet service providers, analysts said Redwood City, Calif.-based ExciteAtHome is the company with the most exposure to advertising in its revenue model.
The company's move toward profitability and its ability to control expenses will also be closely watched, said Abishek Gami, analyst at William Blair.
"The new management is trimming (costs) down. I don't think we will see it all this quarter, but if they can pull it off (cutting back on their cost structure) that would be a big deal," Gami said.
As the dial-up Internet access market matures, analysts said they will also be keen to see the progress Internet service providers are making in the broadband market.
The dial-up Internet access market "is such a difficult sector to compete in. It's a dying business," said Drake Johnstone, analyst at Davenport & Co. "The challenge is can they (industry players) make that transition fast enough to offset slowing growth."
ExciteAtHome is currently the leader in broadband and has made recent progress in increasing its broadband subscriber base, analysts said, citing its recent deal to sell self-installation kits at electronic retailer RadioShack Corp.'s (NYSE:RSH) stores in certain markets.
The following our First Call/Thomson Financial estimates for some of the other Internet service providers reporting in the coming weeks.
Company ESTIMATE
ExciteAtHome Corp. (NASDAQ:ATHM) Q3 loss 10 cents a share
Juno Online Services Inc.(NASDAQ:JWEB) Q3 loss 80 cents a share
EarthLink Network Inc. (NASDAQ:ELNK) Q3 loss 37 cents a share
NetZero Inc. (NASDAQ:NZRO) Q3 loss 25 cents a share |
