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Another Profit for United Online

The Internet service provider adds dial-up customers even as bigger rivals stagnate.

February 07, 2003|David Colker | Times Staff Writer

Discount Internet service provider United Online Inc. posted its second straight profitable quarter Thursday at a time when the major full-priced ISPs are struggling.

The Westlake Village company said it earned $4.7 million, or 11 cents a share, in its fiscal second quarter ended Dec. 31, contrasted with a loss of $15.7 million, or 41 cents, in the same period a year ago. Revenue increased to $66 million from $48 million.

United Online offers limited dial-up service for free and charges $9.95 a month for more complete service through the NetZero, Juno Online and BlueLight brands. Subscribers to United's paid services increased by 328,000 during the second quarter, including 174,000 picked up through the acquisition of BlueLight from Kmart Corp.

United's total paid subscriber level hit a company record of 2.18 million. That's only about 4% of the market for paid dial-up Internet service, but Chairman and Chief Executive Mark Goldston saw the company's small size as a glass half full.

"Our current share is small enough that we could experience tremendous user growth," he said in a conference call with analysts.

The company expects to add at least 120,000 paid subscribers in the current quarter and climb further into the black, with net income of at least $4.9 million.

Even as numerous subscribers switch to faster and higher-priced broadband services, Goldston said inexpensive dial-up would continue to be preferred by a large segment of the market.

"Don't tell me that price is not important to those people, because it clearly is," he said.

United Online does not have a broadband offering. Although the firm charges half as much as industry leaders including AOL Time Warner Inc.'s America Online, Microsoft Corp.'s MSN and EarthLink Inc., it has grown while rivals have lost money and customers. Last month, AOL posted a $98.7-billion loss largely due to troubles at America Online, and EarthLink said it would lay off 25% of its workforce to stem continuing losses.

The earnings announcement came before markets closed. United Online shares Thursday fell 43 cents to $14.91 on Nasdaq.

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