EarthLink CEO: Dialup Internet Access Isn’t Disappearing Yet; WiFi Unit for Sale

ATLANTA — EarthLink (Nasdaq: ELNK) is going back to the basics of concentrating on providing Internet access – including dialup accounts.

Rolla Huff, the Internet Service provider’s new chief executive officer, said Thursday that the firm would focus on dialup and digital subscriber line ISP business. He also said the company would consider acquisitions.

“We believe and most industry analysts agree that there will continue to be a meaningful percentage of households in the U.S. that will have dialup circuits in their homes for years to come,” Huff said in a conference call to discuss EarthLink’s earnings. “Dial access is not an organic growth business, and we no longer try to run it like it is. It’s a mature business that if run correctly will generate meaningful cash flow for many years to come.”

He noted that some analysts expect dialup penetration in 2014 to range between 6-10 percent of U.S. households even though dialup is much slower than DSL, cable or other means of access.
“We believe that, not unlike the paging industry, there will be a meaningful segment of U.S. households that will have a dial-up Internet service connection for many years to come,” Huff added.

EarthLink shares climbed more than 50 cents, or 7 percent, Thursday to $7.18. The company reported that Huff’s reorganization efforts in recent months had reduced employee headcount by more than 50 percent. Huff also is pulling EarthLink out of the municipal wireless fidelity (WiFi) network business. The company also is providing no additional funding for wireless provider Helio, which it had launched as a joint venture with SK Telecom.

In the conference call, Huff said he learned soon after taking the CEO post last June that the WiFi business unit faced significant challenges.

“It quickly became evident that we would have a really difficult time changing the perception by some of the cities that we owed them a free network rather than the city stepping up to make the business model viable for both them and for our shareholders,” he said, according to The Financial Times.
For the most recent quarter, EarthLink said the WiFi business unit lost $32.1 million compared to a $7 million loss a year ago. EarthLink is looking to sell the WiFi business.

For the fourth quarter, EarthLink reported revenues of $282 million and earnings of 19 cents a share, which topped analysts expectations by 4 cents.