Earthlink’s Cash Machine Hums Along

Nobody talks much about Earthlink (NASDAQ:ELNK, news, filings) anymore, but they’re still out there and they’re still generating quite a bit of cash.  Their first quarter seems to have gone particularly well.  Revenues of $157.3M were above both guidance and estimates, as were earnings per share of $0.25 and free cash flow of $54.2M.  So much so that the company raised full year EBITDA guidance to $194-$202M and increased their quarterly dividend by 14%.  Hopefully some of that good cheer will spread throughout the rest of the sector over the next few weeks.

What strikes me the most about Earthlink right now is that they have $707M in cash and equivalents on the balance sheet.  That’s a very big number, big enough to actually do something substantial with if the opportunity arises.  Are they really planning to spend it all on dividends?  Yes, I know that the last time they tried to leverage their pile of gold into the next generation of technology they managed to strike out rather spectacularly (municipal wifi, Helio, ’nuff said).

But if they’d made some smarter choices back in 2005 and 2006, such as investing in metro fiber or data centers, Earthlink would be a vastly different company now.  Hindsight helps obviously, but surely there is something they could do with that cash that would add value to the company?

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Categories: Financials · ISPs