It seems that United Online
United Online provides consumer Internet and media services. Its content and media segment includes social networking through Classmates.com and loyalty marketing through MyPoints, while its communications services include Internet access through NetZero and Juno.
The source of United Online's woes: a $13.3 million pre-tax asset impairment charge, including $4.5 million related to the writedown of certain assets of the company's voice over Internet protocol business, and $8.8 million for the writedown of goodwill and other intangible assets associated with its 2005 acquisition of PhotoSite.
Otherwise, United Online's total revenues for the quarter were $130.8 million, essentially flat with the year-ago quarter's $130.2 million. Accounting for the writedowns, which had an $8 million, or $0.12-per-share, after-tax effect, net income for the quarter was $4.6 million, or $0.07 per share, versus $0.19 a year ago. Excluding the effect of the impairment charges, adjusted diluted net income would have been $0.29 per share, compared to $0.28 last year.
Communications services, which currently account for about two-thirds of the company's total revenues, contributed $87.2 million of total revenues in the quarter. That's down from $104.1 million, or 79.9% of the total, in the final quarter of 2005. Revenue fell primarily because of a 149,000-customer decline in pay accounts, to 2.6 million.
Conversely, revenues at United Online's content and media unit surged 67% to $43.6 million, up from $26.2 million year over year. As a result, the unit's contribution to consolidated revenues increased from 20.1% to 33.3% of the total. Content and media's paying accounts increased by 91,000 during the quarter, for a new total of 2.3 million.
Not surprisingly, the market was less than thrilled with United Online's results. The company, which competes in the same space as Internet firms such as Earthlink
In my rarely understated opinion, the key to the company's quarter was not the asset impairment writedown. Instead, I'm inclined to focus on 1) the flat consolidated revenues and 2) the pay-accounts reduction in the communications services segment. With those two elements in mind, I'd urge Fools to wait at least a quarter to determine whether that bump did any damage to United Online that hasn't yet become apparent.
For related Foolishness:
- United Online Is Off This Time: Fool by Numbers
- Akamai to the Nines
- United Online Logs On to Profits: Fool by Numbers