Earthlink Inc - Growth Via Strategic Alliances And Expanded Services

GROWTH VIA STRATEGIC ALLIANCES AND EXPANDED SERVICES

Working toward its goal of becoming the largest independent ISP, Earthlink forged several strategic alliances in 1998. In February, the firm teamed up with Sprint Corp. in a deal that combined the two companies' Internet services and gave Sprint a stake in Earthlink. It also positioned Earthlink as a major player in the Internet services market and gave the firm access to Sprint's large customer base. By April, Earthlink had signed on its 500,000th member. In another deal, Earthlink's Internet software became the default on Apple Computer's newly launched iMac computer. The alliance with Apple—one of the most successful in Earthlink's history—solidified the firm's commitment to expansion through original equipment manufacturer (OEM) channels. In similar deals, Packard Bell and NEC Ready Computers named Earthlink the default ISP on their computers in late 1998, just in time for the upcoming holiday season. The partnerships secured more member sign-ups than any other marketing promotion in Earthlink's history to date. Finally, an agreement with CompUSA, a major U.S. computer retailer, secured Earthlink as the chain's official ISP and also gave Earthlink access to CompUSA's customers and exposure in the store's promotional materials. By the end of the year, Earthlink's customer base had reached 1 million.

The ISP experienced continued growth into the following year. In March of 1999, Earthlink launched TotalCommerce, which offered small businesses the opportunity to set up online storefronts. It also continued to promote its Click-n-Build Web site creation tool that allowed members to build Web pages. Additionally, members had an opportunity to create a personal start page, which loaded automatically each time they logged on to their accounts. These pages could be personalized with links to various retail sites, investment information pages, and a variety of other online products and services.

Along with helping its members to create a presence on the Web, the company also began to offer high-speed access options. For example, utilizing Sprint's DSL network, Earthlink began offering its customers alternatives to basic dial-up access. It also teamed up with UUNET to offer nationwide DSL access to consumers—the first such offering in the industry. The firm continued to secure lucrative OEM partnerships as well, including being named the official ISP of Micron Millenna computers. Phoenix Technologies also added an Earthlink icon to its new computers.

Earthlink entered the new millennium with a mission of becoming the largest ISP in the world. To facilitate this, Earthlink merged with Mindspring Enterprises, an ISP formed in 1994 by Charles Brewer who, like Dayton, was frustrated with current ISP offerings. After the $1.3 billion deal was completed, Earthlink—which formally changed its name from Earthlink Network to Earthlink Inc.—served more than 3 million members and operated as the second-largest ISP in the United States. A few months later, Earthlink broadened its subscriber base once again with the purchase of OneMain.com, a leading ISP that served 762,000 dial-up, broadband, and Web hosting members in rural and suburban areas. Building upon that deal, Earthlink partnered with Hughes Network Systems in November 2000 to offer high-speed satellite broadband services to those in rural areas.

Believing broadband services were essential to remaining competitive in the ISP industry, Earthlink sought out rival AOL, looking to forge key technology partnerships. In December 2000, AOL agreed to allow Earthlink to use AOL and Time Warner cable lines to offer high-speed services to its members. Despite Earthlink's position as the second-largest ISP in the country, its membership base of 4.8 million was still far behind AOL's nearly 29 million users. Although revenues grew 32 percent in 2000 to reach $986.6 million, the firm had yet to record positive net income. Nevertheless, Earthlink management continued to focus its efforts on offering high-speed access and converting regular dial-up members to broadband services. The ISP industry, which had been experiencing considerable merger and acquisition activity for the past several years, continued to consolidate, prompting speculation concerning Earthlink's future. In a March 2001 BusinessWeek Online article, Earthlink CEO Garry Betty commented: "I could speculate all day about who would buy a company like Earthlink. Our story is that we've been successful providing the basics better than the competition." While Earthlink's future remains uncertain, the company pledges to continue to develop shareholder value in the future while pursuing strategic alliances that fit in with company plans to remain a leader among ISPs.