Some of us spend way too much time online, and EarthLink is OK with that. The company provides Internet connections to more than 1.6 million consumer and business subscribers in the US. About two-thirds of those are broadband users. It also offers such services as VoIP computer telephony and Web hosting. EarthLink provides broadband access over cable lines through agreements with network operators including Time Warner Cable, Bright House, and Comcast, while DSL connections are made possible over phone lines owned by AT&T and Verizon, among others. Subsidiary New Edge Networks implements and manages private data networks in addition to providing Internet access and Web hosting for businesses.
EarthLink's revenue declined for the fourth consecutive year in 2010. Its income fell as well after a rise in 2009 and 2008, following a loss-making 2007. The company's shrinking sales are the result of steadily decreasing consumer subscribers (down in 2010 by about 20%). Meanwhile, fewer consumer customers translates to lower operating costs and expenses in the area of customer care.
To cut costs, Earthlink has renegotiated contracts with its network service providers to match its reduced bandwidth needs, and it has brought down operational expenses partly by reducing staff, particularly in customer service and technical support roles. The company has also continued to cut back on consumer sales and marketing activities as it refocused on customer retention efforts as opposed to costly marketing campaigns aimed at bringing in large volumes of potential subscribers.
While consumer accounts still contribute the bulk of EarthLink's sales, revenue from network infrastructure services for businesses is increasing slowly as a percentage of total sales, accounting for about one quarter in 2010. To offset the shrinking consumer business, the company is investing in its enterprise business primarily through acquisitions.
In 2010 EarthLink bought business communications and technology services provider ITC^DeltaCom for $524 million ($199 million in cash and $325 million in debt). The deal added 16,000 miles of fiber optic network in the southeastern US to EarthLink's infrastructure, and gave its burgeoning enterprise services business a boost, particularly in the areas of IP networking and managed network services.
The company continued its acquisitions in 2011, when it bought One Communications for $370 million (including $285 million of debt). One Communications provides fixed-line traditional and digital phone service to more than 100,000 small and midsize businesses in the Northeast, mid-Atlantic, and upper Midwest. One Communications was integrated into EarthLink's newly established business division, EarthLink Business, which also includes assets from New Edge Network and DeltaCom.
In another move that furthered its push into business services, the company bought Saturn Telecommunications Services (STS Telecom) for $28 million in cash in 2011. The deal increased EarthLink's footprint in Florida and Georgia where STS Telecom provided voice, data, and Internet services to small and mid-sized business clients.
Also that year EarthLink acquired two managed IT services providers, Business Vitals and xDefenders. Business Vitals added a data center in South Carolina, while xDefenders came with a data center in New York. The deals boosted EarthLink's operations in the areas of IT security and professional services. It continued the year on that theme when it bought the IT Solution Center and cloud-based application services from Synergy Global Solutions. The purchase gave EarthLink an expanded IT support services business and a hosted applications service for the environmental services market.
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