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I am surprised by the fact that Earthlink has been able to add subscribers. There are roughly half a million People PC subscribers that have been added to offset losses by the premium priced dial-up service, while broadband numbers continue to increase. Although revenues are flat they have done a good job of cutting costs and total employee headcount has been slashed from 4,169 a year ago to 2,089 at the end of Q1 2004. The amortization costs from previous acquisitions have dropped sharply from $26.83 million a year ago to $7.84 in Q1 2004.

Excluding the facility exit costs of $30 million in Q1 Earthlink chalked up a profit of $18.4 million (0.11 EPS) and is projecting a profit of $21 - $27 million (0.15 EPS) in the second quarter. In Q4 of 2003 ELNK reported net income of $10.7 million (0.07 EPS). A pattern of increasing net income has been established after years of losses. It sure looks like ELNK is on the path to increasing profits although I'm not sure how much further costs can be cut...

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