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Technology Stocks : EARTHLINK (ELNK) -- Ignore unavailable to you. Want to Upgrade?

To: Cooney1 who wrote (1730)	9/23/1999 2:31:00 PM
From: Sarkie	Read Replies (1) \| Respond to of 2553

EarthLink Links Up With MindSpring The Motley Fool - September 23, 1999 12:54 September 23, 1999/FOOLWIRE/ -- After a relatively quiet summer without much in the way of merger activity, Internet consolidation is back, baby! This morning, rival Internet service providers (ISPs) EarthLink (Nasdaq: ELNK) and MindSpring (Nasdaq: MSPG) agreed to merge their operations to form the second largest ISP in the country behind online services giant America Online (NYSE: AOL). Under the deal, each MindSpring share will be converted into one share of the combined company while each EarthLink share will be exchanged for 1.615 new shares. All told, the combined company will sport roughly 3 million subscribers, $650 million in annualized sales, and a combined market capitalization in the $3 billion neighborhood. The companies get a "D" in the name creativity department, opting to call the new entity plain-old EarthLink instead of mimicking Excite@Home (Nasdaq: ATHM) with a fancy appellation such as EarthSpring, MindLink, or EarthSprings2Mind. The new EarthLink will set up shop in MindSpring's current digs in Atlanta. MindSpring founder, chairman, and CEO Charles Brewer will assume the chairman's reins, while current EarthLink president and CEO Garry Betty will serve as CEO. The companies are making a valiant attempt to sell the merits of the combination to the investing public, spinning the bigger EarthLink as "the clear alternative to America Online" and stressing that there is significant room for growth with 70% of U.S. households still not connected to the Web thang. Will that be enough to drive future share price appreciation and make the new EarthLink positively earth-shattering? Or is the beefed-up ISP just another hum-drum sausage link to the Web? One way to create value and score points in the Internet access area is to rip pages out of the AOL playback and do an end-run around the online giant's weaknesses. The companies seem to have the connectivity part of the Internet down cold. But to attract and keep the eyeballs so prized in today's net-crazy environment, EarthLink will need to build on the other four parts of what fellow Fool Jeff Fischer has termed the five "C's" of AOL's business model -- connectivity, content, community, commercials, and commerce. Content is currently a gaping hole at the two companies' fledging portals. Outside of EarthLink's bLink online magazine, MindSpring's personalized Web domain hosting services, and a smattering of lame contests and surveys, unique content offerings are pretty weak. In the community-building area, both companies took a big step forward last month by signing separate co-branding arrangements to use AOL's Instant Messenger software, which is the online duct tape that holds much of AOL's successful community together. These areas will need to receive more attention post-merger. With PC companies such as Gateway (NYSE: GTW) and Dell (Nasdaq: DELL) and free ISP firms such as Freeserve entering into the Web access area and pushing prices down, strong content and community positions will be valuable assets for ISPs both in attracting new clients and in keeping the existing users on board. Perhaps the most intriguing areas for investors are the dual-pronged commercial opportunities that an ISP brings to the table by controlling the advertising Web users see day-in and day-out and by direct-selling an endless amount of products to the large installed user base. By combining their decent-sized user bases into one jumbo user base, the two companies will carry more clout with advertisers and will attract new business. The larger scale also produces an opportunity for more co-marketing arrangements with retailers to sell products to a large group of potential buyers. The sixth, wild card "C" for the new EarthLink, however, is the companies' stellar customer service track records. The two firms were ranked numbers one and two in overall national ISP customer service in a recent JD Power and Associates study. Hitting AOL where it hurts and taking advantage of the love/hate service relationship the company has with many of its users might be EarthLink's best competitive weapon. Touting its throne as the country's most customer-friendly ISP will not provide a huge competitive advantage against the AOL armada, but it certainly won't hurt either as the new EarthLink blitzes the airwaves with ads and seeks to add more net-heads to its ranks of users. Creating substantial value for shareholders in a market dominated by such an entrenched competitor as AOL will certainly be a challenge. But with MindSpring on board, EarthLink poses a much larger threat than it ever has before. -- By Brian Graney