EarthLink's profit tumbles 42 percent in 3Q

EarthLink Inc.'s quarterly profit dropped 42 percent as the Internet provider, grappling with a dwindling subscriber base, reported that fewer people are leaving than a year ago.

The Atlanta-based company, which two years ago slashed nearly half its work force in a major restructuring, topped Wall Street's forecasts and raised its 2009 guidance. EarthLink cited ongoing cost-cutting and productivity gains as one reason for the higher guidance.

EarthLink said Tuesday that it earned $29.9 million, or 28 cents per share, versus $51.9 million, or 46 cents per share, in the year-ago period.

Sales dropped 24 percent to $174.5 million.

Analysts polled by Thomson Reuters expected profit of 25 cents per share on $174.4 million in revenue.

The company lost 146,000 subscribers in the third quarter, which EarthLink said was less than the 275,000 customers it lost in the year-ago quarter. The company is facing pressure from telephone and cable companies and a shift away from dial-up Internet access. EarthLink has focused on customers that plan on sticking with dial-up. The company said in the latest quarter, 80 percent of its consumer customers have been clients two or more years. It said broadband products made up more than half the company's revenue.

EarthLink raised its full-year guidance for 2009. The company says it now expects one measure of profitability - its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) - to be $243 million to $248 million with free cash flow of $225 million to $235 million.

The stock rose 3 cents to $8.69 in midday trading.