US Report: EarthLink deal underlines new direction for US ISPs

EarthLink Network Inc. Monday struck an exclusive distribution deal with CompUSA Inc., one of the largest computer retailers in the United States.
Written by Matthew Broersma, Contributor

The deal makes EarthLink the chains official Internet service provider -- giving the company distribution on CompUSA-branded PC's, in CompUSA training workshops and point-of-purchase promotions.

"In an era when consumers are beginning to buy computers for the purpose of going on the Internet, this gives us especially strong exposure with a prominent retail chain whom people know and trust," said EarthLink spokesman Arley Baker.

Facing intense competition and shrinking profit margins, ISP's are turning to such distribution deals, with retailers or PC manufacturers, for an edge over their rivals.

Earlier this year, for example, AT&T's WorldNet ISP and MCI each forged branding and distribution deals with several consumer Internet hubs, such as Yahoo, Excite and Lycos, in order to increase their exposure and sign up more users.

EarthLink's access software will get exclusive placement on the desktops of CompUSA-branded PCs, and will be the default ISP on all Internet training courses offered by CompUSA (NYSE:CPU). EarthLink said it will also be the exclusive ISP for such promotions as grand openings, quarterly mailings and in-store registration drives.

"Our partnership with EarthLink supports our goal of being a total solutions provider by allowing us to offer a proven Internet access solution,'' said James Halpin, president and CEO of CompUSA, in a statement.

Last quarter, EarthLink reported a loss of $18.8 million, or 78 cents a share, on sales of $49.8 m (£30m). First Call consensus expects the US company to lose 3 cents a share in the fourth quarter. In the fourth quarter of 1997, it lost $6.6 m (£4m ) or 30 cents a share, on sales of $24m (£14m). Its shares peaked at 58 3/8 earlier this month after trading at a 52-week low of 9 1/16 last November. All five institutional investment firms following the stock maintain either a "buy" or "strong buy" recommendation.

Analysts peg EarthLink for a loss of 55 cents a share in the fiscal year.

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