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This week, EarthLink Inc. (NASDAQ: ELNK) announced its Q4 results. There was a loss of $9.5 million, or $0.08 per share, which included a $31.1 million write-off from its wi-fi assets.
And, yes, now the company wants to offload the segment. So what does this mean for EarthLink, as well as the space?
Well, I had a chance to interview Craig Settles, who is the author of After Muni Wireless Comes to Town. According to him:
Probably the most common question this sale generates is, why would anyone want to buy the business? It ultimately depends on how much is the asking price, and what actual assets come with the deal. If you look back at Metricom, who marketed Ricochet, they didn't get a whole lot when they sold their business out of bankruptcy court.
Assuming there is something worth buying, what company steps up to the plate comes down to who has the right perspective on this thing. There are a lot of local governments assessing the business case for building a network that primarily facilitates mobile government worker and asset management. If a small service provider or a company with an active hotspot business can see a way to repackage and remarket the EarthLink business to meet this need, they're a logical buyer.
I think EarthLink's position that there's no money to be made with muni wireless is true, to a point, if the only thing you want to do is sell a general consumer service. And I think that anyone who buys this business with that in mind is in for trouble. There were three successive buyers of Ricochet post-bankruptcy, and I don't believe any one of them had a winning business strategy when they plunked their checks down. But selling muni wireless as a local government resource, this can be the ticket to success.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
2-10-2008 @ 7:46PM
Tim Jones said...
This isn't surprising. My experience with Earthlink tells me they need new management.
Earthlink still owes me a refund of more than $200 when I canceled their service because it didn't work in my Anaheim condo. I canceled immediately when their modem didn't get a signal and requested their "pre-printed" address label to send the modem back.
The label never came. Now, the worst part. They claim UPS couldn't find the address to send me the label. It was the same address they sent the modem to: a five acre school site where I teach. Instead of emailing me, or calling me when this occurred, they reinstated the service and charged me two more months of service.
I received the label two months ago, mailed in the modem, but still haven't received the refund. Perhaps they need to sell their interest in this to pay back people like me.
Municipal wi-fi is a great idea. Perhaps it needs to be done by someone who can manage a business.
2-11-2008 @ 8:36AM
Myself said...
Ricochet's assets weren't worth much because the installed base of infrastructure was encumbered by such a mess of contracts with a zillion municipalities, all of which would've needed renegotiating to relaunch service. The warehoused equipment was proprietary, only useful for more Ricochet deployments.
In Earthlink's case, the market is more mature (Ricochet was far ahead of its time) and I hope they learned a few things about equipment placement contracts. I don't know the specifics of their installations, though. The fact that wifi is an inferior technology, not designed or particularly suited for municipal-scale deployments, doesn't seem to be as important as the hype surrounding the buzzwords.