The communications company reported a loss of $24.8 million, or $0.20 per share, in the fourth quarter, compared to net income of $29.2 million, or $0.22 per share, this time last year. In good news, EarthLink's revenues increased 5% to $328.2 million, including a 35% increase in broadband revenues. As has been the case for quite some time, though, narrowband revenues declined, this time by 15.8% to $145.2 million. There's nothing new there, of course.
EarthLink's wireless venture Helio, a joint venture with SK Telecom
Free cash flow for the quarter was $0.8 million, a 98% decrease on a year-over-year basis. EarthLink's cash reserve dropped 6.5% to $394.8 million, and let's not forget it took on convertible debt recently (yielding proceeds of $236.7 million). EarthLink's press release didn't include full balance sheet data nor a cash flow statement, so investors will have to wait for the company's annual 10-K filing with the SEC to dig deeper.
As for its outlook, EarthLink said it expects sales to be flat to slightly up in 2007 at $1.30 billion to $1.35 billion, with a net loss between $110 million and $150 million. In addition to Helio, EarthLink still has municipal Wi-Fi in its sights -- it said it expects to significantly expand those areas and increase marketing of such services.
I've often thought it was arguable that EarthLink stock had a speculative bent for investors as it tries to evolve past its old-school dial-up legacy. There's some logic in trying to get into more service offerings than merely broadband, since it faces such formidable competitors, with telecom companies like Verizon
I haven't been too terribly bullish on EarthLink in the past, wondering whether it's attempting too much in such a competitive landscape. At any rate, it's obvious that this year EarthLink is going to be in "investment" mode -- some might call it "cash burn" mode depending on how well they think it might do over the long term. Even with today's drop in price, I'm certainly not convinced EarthLink's a bargain at the moment, with losses expected in the year ahead and a lot that remains to be seen when it comes to its ability to compete against so many rivals with its nascent services like Helio.
For more on EarthLink, see the following Foolish articles:
- Here's 2006 in review for EarthLink.
- Take a look at EarthLink's third quarter.
- Here's EarthLink's second quarter, too.
Alyce Lomax does not own shares of any of the companies mentioned.