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EarthLink reports Q2 loss; COO Wetzel steps down

Rochester Business Journal
August 2, 2012

EarthLink Inc. shares were down more than 10 percent Thursday afternoon after the company reported a drop in revenues and a net loss for the second quarter.

The company also said President and Chief Operating Officer Joseph Wetzel will exit at the end of the year. Wetzel has been with EarthLink since August 2007.

CEO Rolla Huff will serve as president after Wetzel’s departure. Company officials explained that as a company incorporated in Delaware, EarthLink is required to have someone carry the title of president, so Huff assumed that title in addition to the titles of chairman and chief operating officer.

EarthLink, which employs more than 400 people in the Rochester area, posted a net loss of $1.1 million, or 1 cent a share, for the quarter, versus net income of $6.5 million, or 7 cents a share, a year ago. The results include an $8.3 million charge to increase reserves for regulatory audits.

The firm posted net income of $7.3 million, or 7 cents a share, in the first quarter.

EarthLink logged second-quarter revenues of $338.2 million, down 7 percent from $363.6 million a year ago.

Bloomberg reported that analysts expected a profit of 3 cents a share and revenues of $339 million.

“In the second quarter, we accrued just over $8 million to increase our reserves for certain regulatory audits,” Huff said in a conference call. In particular, an audit is being conducted by the Universal Service Administration Co. on Federal Universal Service Fund assessments and payments in EarthLink’s legacy ITC-DeltaCom business. Huff added that USAC rules can be somewhat subjective and open to different interpretation.

At 3:30 p.m. Thursday, the company’s shares (NasdaqGS: ELNK) were trading at $6.07, down 73 cents from Wednesday’s close. Earlier in the day, the stock marked a 52-week low of $5.94.

Despite the second-quarter results, Huff remained positive in a statement.

“We are making good progress in the transformation of platforms, products and people to position EarthLink for long-term success as an IT services company,” he said. “Our business is trending in the right direction towards growth.”

(c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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