Earthlink: Is Big Cash Payout In The Cards?

There long has been speculation that Earthlink (ELNK) might eventually buy AOL’s dial-up access business from Time Warner (TWX). But AOL, of course, is now going to be spun off as a separate company, access segment and all. Jefferies analyst Youssef Squali says the planned AOL spin makes a deal with Earthlink less likely, although not impossible.

If no deal materializes, he says, Earthlink will be more likely to do something else with its mounting cash pile: Squali thinks either a dividend payout or large stock repurchase could be in cards before year end.

At end of the latest quarter, Earthlink had $565.8 million in cash; the company has a market cap of $805.4 million. Note that ELNK also has $258.7 million in long-term debt.

ELNK today is up 9 cents, or 1.2%, to $7.64.