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 (68)	5/13/1997 8:19:00 AM
From: Garry Betty	of 220

Hello again John G: Mindspring is indeed our closest comparable on the public market. I know the people who founded MindSpring personally and many of the EarthLink's beliefs are shared by MindSpring. A couple of observations on your above comments. First, EarthLink showed a 27% increase in revenues for Q4 to Q1 whereas, Mindspring's revenues only grew by 14.7%. Additionally, EarthLink is actually much larger than Mindspring. Our quarterly revenues were 44% larger than MindSpring in Q4 and increased to 59% larger in Q1 of this year. Our customer base is 81% larger or almost twice as big and our revenue growth in the past quarter was 83% larger than Mindsprings. The net of this is that we are larger and this gap is growing sequentially. My growth comments is the previous posts is applicable here as well. Also, one of the principal differences between our two companies has been demand creation. We have effectively partnered with companies who are creating a reason for user's to get on the Internet as a way to cost effectively add user's to our customers base. Until, our recent acquisition of Internet in a Mall's customer base, almost all of our growth has been generated through internal means. Mindsping, on the other hand has grown to a much larger extent through acquisition. A big part of their tangible net worth is the good will associated with those acquisitions, as of 12/31, they had over $11M in intangible assets on their balance sheet. Previously, I had posted a view on this. EarthLink fully expenses its acquisition costs in current periods, but had we chosen to capitalize and ammortize these costs it would have reduced our operating losses last year by about $20M. (and conversely increased our book value by the same amount) Finally, on the issue of Operating Margin, I had previously posted our sequential decline in operating losses for the last three quarters from about 100% to about 75% to 52%. Our continued sequential growth will drive the percentages and the absolute losses down signifcantly. Mindspring's loss as a percentage of revenue declined quater to quarter by about 5% and thier absolute loss did not decline. I think Mindspring is a good company but I obviously thing that EarthLink is equally good are better. We have made the attendant investments in infrastructure and people to be a much bigger company and are moving forward to demonstrate that our business model can create a profitable result. cgb

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