EarthLink CFO resigns
One day after securing $15 million in a private stock placement, cash-strapped EarthLink Network Inc. of Pasadena, Calif., announced the resignation of chief financial officer Barry Hall.
Company officials said Hall left the Internet service provider to pursue other opportunities.
"Barry raised more than $57 million for this company in the past year and a half and helped us grow from 50,000 to 300,000 clients," said CEO Charles Betty, who will assume the CFO role until a replacement is found. "I think he felt that he was ready to do something new."
Despite raising more than $26 million in its January initial public offering, EarthLink has been unable to stem the flow of red ink. After losing more than $8 million in 1996, the company has reported losses in its last three quarters but managed to increase its revenue to more than $18 million in the second quarter.
But Thursday's $15 million cash infusion, ushered in by lead investor Soros Fund Management LLC, gave analysts the impression that EarthLink was on the verge of turning things around.
While Hall undoubtedly played a major role in bringing the private placement to fruition, analysts said internal rumblings about Hall's performance, particularly a second quarter filing with the Securities and Exchange Commission which stated the company would run out of money by year's end, may have led to Friday's resignation.
Company officials attempted a bit of damage control by changing the wording of the report, but it was too late to avoid a harsh reaction from Wall Street.
"That situation probably didn't help (Hall's) situation," said an analyst who spoke on the condition of anonymity.
Betty said the SEC filing had nothing to do with Hall's departure.
"I would say it was an amicable parting on both sides," Betty said.
Hall was unavailable for comment.
EarthLink and other ISPs hoping to gobble up market share in the lucrative service provider market have sacrificed tremendous amounts of cash to accrue clients and momentum. Company officials said the $15 million private placement will help EarthLink expand its customer base and fortify its infrastructure.
Some analysts said the $15 million investment and Hall's immediate departure may have been related.
"It's sort of like the Golden Rule," one analyst said. "He who holds the gold makes the rules. The investors may have decided that, regardless of how good of a CFO Hall was, they wanted someone else in charge of the finances."
Barry bristled at the suggestion that Soros or any other investor would influence the company's executive staff.
"The decision as to who will replace Barry will primarily be mine," he said. "I don't think Soros would continue to make the investments they have with us if they weren't comfortable with our management team."