EarthLink Network ELNK Wraps Your Fish Message Board

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Technology Stocks : EarthLink Network ELNK Wraps Your Fish

ELNK 5.630

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Mar 8 4:00 PM EST

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To: Q. who wrote (66)	5/13/1997 7:17:00 AM
From: Garry Betty	of 220

Hi John G: BBN and EarthLink business models are quite a bit different. For instance, in our view of the world, BBN would have been a potential wholesale IP provider to EarthLink at some point in the future. Our product line and customer focus rarely put us in competition with each other. As an example, I recently ordered a T-3 connection from BBN that increases our connection capacity to the Internet by 25%. For business web sites or other dedicated connections we compete, for any of our dial up business, I can't remember an instance where our companies were in competition with each other. To address you specific question concerning relative values I would like to address several scenarios. If you look at how different financial institutions value companies, particularly those in the Internet space many different analyses are computed. Valuation can be computed on a value per subscriber, it can be as you put forth in the above analysis or it can be a multiple of forward looking revenues which puts a premium on expected growth, just to name a few. One of the primary differences between EarthLink and BBN is our relative growth. BBN has been around for many years and EarthLink will celebrate its three year anniversary this coming July. Last year EarthLink's revenue grew over 1000% year over year and this year we will likely enjoy growth of around 300%. This is contrast to BBN's growth, which according to their latest 10Q grew only 53% last year. Taking growth into consideration would change your "take over" values signficantly in the above calculations. The same is true if you use projected 1997 revenues or multiple of current quarters annualized. If we achieve $90M in revenue this year, then you have potentially understated the take over value for EarthLink by about 50% on a projected basis or significantly more than that if you were to use 4X times the projected Q4 revenues. Saying the above, I must add the caveat that ultimately stock values are based on multiples of earnings and free cash flows from operations. Driving EarthLink to profitability is my preoccupation and when a profitable business model is demonstrated, EarthLink shareholder's will be rewarded.

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