June 29, 1999
OneMain.com Expects To Beat Analysts' 2Q
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By PETER LOFTUS
NEW YORK -- From Bakersfield, Calif., to Burlington, Vt.,
OneMain.com Inc. (ONEM) wants to be the hometown Internet service
provider for Anywhere, USA.
In recent weeks, Wall Street hasn't made OneMain.com feel very much
at home, driving down its stock price after an explosive initial public
offering in March. But the company believes its strategy of providing
geographically oriented Web access to underserved areas - as opposed
to creating one giant virtual network - is paying off.
OneMain.com is "highly confident" that its results for the second
quarter ending Wednesday will beat analysts' estimates, Chairman and
Chief Executive Stephen E. Smith told Dow Jones Newswires.
OneMain.com expects to report a second-quarter loss narrower than
the First Call Corp. consensus estimate of $1.07 a share, on revenue
exceeding estimates of about $21 million, Smith said.
He also predicted second-quarter earnings before interest, taxes,
depreciation and amortization, or EBITDA, would be narrower than the
negative $4.5 million analysts expect. Year-ago comparisons aren't
meaningful due to the March IPO.
The company expects to report second-quarter results around the third
week of July.
'Creating A Series Of Geographic Communities'
Continued subscriber growth has driven the improved results, Smith
said. He expects the company to beat analysts' projections of 20,550
new subscribers for the second quarter, adding to the existing base of
about 418,000 subscribers.
And even more subscriber growth appears to be on the horizon for
OneMain.com, which ranks among the top 10 ISPs. The company might
announce this week the acquisition of a regional ISP, Smith hinted,
declining to provide further details.
"We're a very unique niche in the Internet service provider space,"
Smith said. "Instead of creating a large virtual network out of our
network, we're actually creating a series of geographic communities."
With customers in 11 states, OneMain.com, Vienna, Va., doesn't serve
any of the 25 largest metropolitan areas in the U.S. In roughly half of
OneMain.com's coverage area, access to top ISP America Online Inc.
(AOL) requires a long-distance phone call, Smith said. OneMain.com
provides local phone numbers for Internet connections.
In these underserved areas, online users want a "localized feel" to their
Internet access, Smith said. OneMain.com provides this feel by offering
information, advertising and links to other Web sites focusing on the
user's community, Smith said.
OneMain.com is the amalgamation of 18 small ISPs whose merger was
funded with the nearly $190 million raised March 24 in one of the
largest Internet IPOs in history. The integration of these various
properties, plus two recent acquisitions, are ahead of schedule and
below budget, Smith said. The integration includes creating one
common brand and a common billing system.
CEO Calls OneMain.com Stock Undervalued
Smith said the company's recent stock performance surprises him. The
shares traded as high as 46 3/4 on March 25, the day after they were
priced at $22, but closed Monday at 17 5/8, down 3/4 for the day. They
were recently up 1/4, or 1.4%, at 17 7/8.
Smith attributed the price decline to a drop in the volume of shares
traded, perhaps due to individual investor selling to meet margin calls.
But he is heartened that the stock still has strong institutional ownership.
He called the stock undervalued.
"Fundamentally our business is stronger than the stock price would
suggest," Smith said.
ISPs like OneMain.com have come under pressure to team up with
non-ISP partners. Illustrating this, reports surfaced last week that
computer maker Gateway Inc. (GTW) was in talks to acquire EarthLink
Network Inc. (ELNK), one of the top ISPs. Analysts envision ISPs
partnering with telecommunications concerns, PC makers and Web
content providers.
Smith thinks the trend will be ISP partnerships with PC makers.
OneMain.com itself has held talks with computer makers, though Smith
declined to comment further.
Meantime, OneMain.com will pursue organic growth of its subscriber
base of about 12% to 15% each quarter, as well as acquire additional
leading midsize ISPs with at least 15,000 subscribers.
- Peter Loftus; 201-938-5267; peter.loftus@dowjones.com
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