From RedHerring.com:
redherring.com
THE MISSING LINK?
Yes, Earthlink is an Internet service provider (ISP), and we all know that's a highly competitive business that has
become increasingly commoditized by companies like Netzero (Nasdaq: NZRO) and Juno Online Services (Nasdaq:
JWEB), which offer free Net access.
But Earthlink, which has a market value of just $1 billion and trades at $7.97 a share, had about $750 million in cash
as of September 30, which works out to $5.77 a share. The amount of cash the company has is actually 9 percent
higher than it had at the end of 1999. And I do see some other positives that suggest maybe the stock has bottomed.
Investors are continuing to fret about the outlook for ad-addicted Internet companies like Yahoo (Nasdaq: YHOO),
Netzero, and Juno. Earthlink, however, is not dependent on advertising for its survival, something I think is often
overlooked.
During the first nine months of 2000, only 3.4 percent of Earthlink's total revenue came from what the company
refers to as content, commerce, and advertising, while 84.6 percent of revenue came from narrowband access fees.
Broadband access is also a small but growing part of Earthlink's business, with broadband revenue increasing 114
percent in the first three quarters of 2000 over the same period in 1999. Broadband revenue accounted for 5 percent
of Earthlink's overall sales.
And with the America Online (NYSE: AOL)/Time Warner (NYSE: TWX) merger set to close soon, the company
stands to benefit in the latter half of 2001 as Time Warner will be forced to open its cable lines to Earthlink. Earthlink
is already the second-largest ISP, with 4.6 million subscribers, and I think the fact that it is more immune to the
dot-com advertising slowdown than its free-ISP competitors enhances its chances of surviving the shakeout. |
