NetZero Reports 2Q Earnings Drop

Friday, February 9th 2001, 12:00 am
By: News On 6

LOS ANGELES (AP) — Free Internet service provider NetZero Inc. reported a steep drop in second quarter earnings and announced that it would begin charging customers for premium services.

The troubled Westlake Village-based company on Wednesday reported a net loss of $43.4 million, or 38 cents per share, for the quarter ended Dec. 31, compared with $24.6 million during the same period last year, coming in well below analyst expectations.

Excluding one-time charges, the company's loss for the quarter ended Dec. 31 was $33.5 million, or 29 cents a share.

Analysts surveyed by First Call had anticipated a 25 cent per-share loss for the quarter.

Revenues rose 31 percent to $16 million from $12.2 million the year before. Registered users at the end of December climbed 35 percent from the fiscal first quarter to 7.7 million. In January of this year, registered users climbed to 8.4 million.

NetZero had relied on advertising dollars for its income and cited industrywide weak sales for its latest losses.

Its first new service, NZ Platinum, will cost $9.95 a month and will give customers unlimited access without having to give up significant screen space to advertisements. Its other new paid service, NetZero Professional, will charge consumers $9.95 a month only if they are logged on for more than 40 hours during that period.

``It was a risk we felt we had to take,'' NetZero chairman and chief executive Mark Goldston said in a conference call with analysts. ``Either the heavy users are going to pay the fee, or we save a ton of money on telecom (telephone) expenses.

``Either way NetZero wins,'' he said.

Competitors are also scrambling to find new ways to survive. Rival Juno Online Inc. last week said it was considering allowing businesses to tap into the processing power of customer computers for a fee, for example.

Shares in NetZero have plummeted more than 95 percent in the past year, reaching a 52-week low of 69 cents Jan. 2. The stock had been soaring above $34 a share a year ago.

Shares of NetZero were down 6.3 cents to $1.28 at the end of regular trading Wednesday on the Nasdaq Stock Market. NetZero's stock fell to $1.09 in after-hours trading.