NEW YORK, Feb 7 (Reuters) - NetZero Inc. (NasdaqNM:NZRO - news) said its fiscal second quarter loss widened and missed consensus estimates and the free Internet service provider said its third quarter revenues would not grow during the third quarter due to the continued weakness in online advertising spending.
In a conference call, NetZero Chairman and Chief Executive Mark Goldston also said the company would introduce NetZero Platinum, a $9.95 high-quality pay ISP without ad banners, later this quarter, to diversify its revenue base.
The company said in a statement that its pro forma loss for the Dec. 31 quarter, before charges and items, was $33.5 million, or 29 cents a share, compared to a loss of $24.4 million, or 27 cents a share, a year-ago.
Wall Street analysts, on average, had expected the company to post a loss of 25 cents a share, and revenues of $17.1 million, according to First Call/Thomson Financial.
Including items, the company's net loss widened to $43.4 million, or 38 cents a share, from $24.6 million a year-ago. A year-ago share figure was not provided.
Revenues rose 31 percent to $16 million from $12.2 million a year-earlier. Registered users at the end of December climbed 35 percent from the fiscal first quarter to 7.7 million.
``The market rates and amount budgeted by advertisers continues to decline,'' said Chief Financial Officer Charles Hilliard in a conference call. He said advertisers were looking for payment concessions on recently signed contracts and the company was also seeing outward breaches of contracts.
The ad climate decreased NetZero's fiscal second quarter revenues by $1 million and Hilliard said that revenue growth during the next quarter would be flat from the first quarter.
Wall Street analysts, on average, had expected the company to post third quarter revenues of $21.5 million, according to First Call/Thomson Financial.
Hilliard also said visibility ``was muddied'' and there would be no shortages of surprises going forward. Given that, he declined to give guidance on the third-quarter bottom line.
The company boasted an additional 1.6 million monthly active users in December and said it was NetZero's best quarter in terms of user additions.
The growth came as the competitive landscape for free ISPs has shrunk as companies seek to diversify their revenue base against the backdrop of a decline in advertising spending.
In January, the company launched a program that requires users who are online more than 40 hours a month to sign up for NetZero Professional and pay $9.95 a month.
NetZero believes a significant number of its heavy users that would normally fall into NetZero Professional will opt to join its new NetZero Platinum service for unlimited access.
It will outsource billing for the service and will generate ad dollars from its start page along with some other features, Goldston said.
NetZero expects a 10 to 15 percent increase in cost of revenues during the quarter as it implements new programs. It has implemented a company-wide ``re-engineering'' to cut costs, but Goldston said the cuts will not come from a reduction in manpower.
Shares of NetZero have fallen more than 75 percent from a near-term high in mid-July. Its shares closed off more than 4 percent, or 1/16, at $1-9/32, off its 52-week low of 11/16, before the results.
``The ad market is not a beautiful place right now, but it's not terminal,'' Goldston said. ``We are not in hover mode. We are aggressively pursuing our business strategy.''
He added that the company ``unequivocally'' still believed in the free ISP model and was ``more bullish and convinced'' it is possible to make a profit off a free online service.
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what a pos nzro is. POS! another flying pig pos goldman brought to the markets. lol! |
