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Traders at Palma are Bullish on ELNK

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Traders at Palma are Bullish on ELNK

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Traders at Palma are Neutral on ELNK

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AP
EarthLink to Build Atlanta Network
Friday January 26, 7:24 am ET

EarthLink to Build Out Municpal Wireless Network in Atlanta

 ATLANTA (AP) -- EarthLink Inc. had made a deal to build a wireless Internet network for the city of Atlanta.

Thursday's announcement came as little surprise. EarthLink, which is based in Atlanta, has been seeking deals with many other cities in the country.

Details -- such as how much services will cost and when they could launch -- were not disclosed. EarthLink would only say it is "excited" to be able to provide affordable wireless service in the city.

Earthlink (ELNK) this morning posted Q3 revenue of $174.5 million and profits of 28 cents a share; the Street had been expecting $174.4 million and 25 cents. Revenue was down 6% sequentially and 24% year over year.

The Internet service provider said it now sees adjusted EBITDA for the full year of $243 million to $248 million, with free cash flow of $225 million to $235 million, with income from continuing operations of $110 million to $115 million.

Level 3 (LVLT) poised for major broadband demand. A bullish analyst view from Mike Sapien, a principal analyst for Ovum, a telecommunications, software and IT analysis company with offices worldwide.

As a result of LVLT's nine acquisitions in the last five years, the company not only supplies fiber optics network infrastructure to companies like Comcast Corp. (CMCSA), AT&T Inc. (T), Sprint Nextel Corp. (S) and EarthLink Inc. (ELNK), but it is moving into the "enterprise" sector, which LVLT calls its Business Markets Group.

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.

Earthlink (ELNK) is an odd company: it continues to generate more and more cash from the terminally ill (and steadily shrinking) dial-up Internet access business. It’s coffers are bursting at the seams. Judging by the company’s valuation, the Street doesn’t see a whole lot of value in the core business. But there certainly is intrigue over the cash - including whether the company will eventually buy the AOL dial-up access business.

EarthLink (ELNK) CEO Rolla Huff has successfully turned the company around after his predecessors burned hundreds of millions on ill-fated investments in municipal wi-fi and mobile. Now he's still looking to make some deals -- but in no hurry.

"Our company's financial strength and relative value in the technology industry have substantially improved over the past year," Huff said in EarthLink's fourth quarter earnings release. "As a result, EarthLink has an expanded set of potential strategic alternatives that we are considering."