Earthlink Rides On Past the Sunset

April 29th, 2009 by · 1 Comment

Remember Earthlink (NASDAQ:ELNK, news, filings)?  It was just last year that it seemed like everything was falling apart for the company, as its various efforts to leapfrog its dialup business floundered.  But not only are they still out there, they're still profitable and they actually had a very nice first quarter.   Revenues of $199.1M and earnings per share of $0.30 were some $10M and $0.05 above expectations, respectively.  Despite the recession, they raised EBITDA guidance for the year and continued to buy back stock during the quarter.

elink_logoEarthlink's revenues continue to decline, but their performance remains an object lesson in the value one can find in the twilight of a technology that still generates good cash flow.  If one manages it correctly, at least.  Their revenues over the last few quarters has declined steadily, but free cash flow remains robust and has declined more slowly and the company has bought back stock with part of it.  The rest they have been saving, and they currently have over $565M under their mattress.

That got me thinking...  Earthlink got hurt on its last foray into new markets, but that doesn't mean there isn't a right time to try again.  No, I don't mean they should blow more money on muni wifi or BPL or Helio, but that $565M might go a long way at the moment for assets with proven value and a long term future - yep I'm thinking metro fiber.  Heck, Zayo put together its network for much less than that, and prices are even lower now.  The one speculative investment they made that has done reasonably well has been New Edge Networks, it's not really that big a leap.

Nah, that'd be crazy, right?  But still, there has been speculation as to why Earthlink hasn't bought AOL's remaining dialup business, considering its ability to milk its own.  Perhaps they have better plans for the money?

Categories: Financials · ISPs

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  • The_highwayman says:

    Rob,
    Time Warner announced about 2 hours ago that their BOD is moving to spin off AOL…kinda interesting that you borught up AOL, etc

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