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EarthLink Network ELNK just went public this morning. It was priced at $13, below the filing range of $14-16 and as I type this the few idiot institutions who bought the primary are dumping this loser on the hapless private investor at NO PROFIT. That's right they're dumping this one at $13. EarthLink Network is a nationwide Internet Service Provider (ISP) (without its own infrastructure - they lease, primarily from UUNet) planning an IPO in the near future. They cancelled their IPO once due to lack of interest and sponsorship but now that tech stocks are on the rise they are attempting it again. Stay Away! First off, check techweb.com [after Tuesday, Jan 21, you'll have to go to his column archives] in which Tom Taulli, the creator of WebIPO and an expert on the tech IPO market, warns off potential investors because in his opinion EarthLink will never make any money, only losses. What Taulli doesn't mention (possibly for fear of lawsuit) but which I will mention here is that EarthLink is virtually controlled by The Church Of Scientology. That's right - the same pyramid scheme masquerading as a religion which was exposed and debunked by 60 Minutes a few years ago. EarthLink's CEO is 24 years old and was educated by his parents completely outside of the educational system in Oregon. His financial backers are present or former members of The Church Of Scientology, some of them high up in the pyramid scam. I have now heard from a number of sources that pressure is placed on ALL employees to convert to Scientology. This is no way to run a business, especially one in the enormously competitive area of Internet Service Providers. EarthLink's business model is worse than AOL's. Not only do they make all sorts of unrealistic assumptions about future revenue flows, and costs of acquiring subscribers -- they also (unlike AOL) don't even own their own backbone. If UUNet and the other big backbone providers continue to find business demand for quality service skyrocketing to the point where provision exclusively to businesses is much more profitable than re-selling bandwidth to retail providers, they will undoubtedly cater to the most profitable audience and leave EarthLink high and dry. How will EarthLink provide service at a profit ? They will be forced to either 1) build their own infrastructure; something they have no experience in and which is extremely expensive and complex; or 2) begin buying backbone through some sort of takeoever. Then their business model will essentially be the same as the Baby Bells, AOL, MSN, ATT, MCI, etc. But by that time you can be sure that the big telcos will have got their act together and competition in the non-niche retail area will be devastating and unprofitable for all except those with the largest economies of scale - economies of scale only attainable via substantial ownership of infrastructure, network expertise, and bundled marketing (bundle inet service w/ phone, or with video-on-demand, etc.) Any way you view the future of the internet as unfolding EarthLink is a sure loser. Top-tier technology i-banks won't even touch them and they are relying on a trio of 2nd-tier wannabees. Don't get suckered by another Internet IPO snow job - stay away. If you want to make some money, wait until the restriction on shorting expires and then join me and short the hell out of this piece of moldy fish wrapping paper. Short ELNK is a sure winner. | ||||||||||||||
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