Digex posts a loss of 80 cents per share for 3rd quarter

Shares fall to $1.59, were as high as $150 in March last year

A former prize struggles

October 25, 2001|By Andrew Ratner | Andrew Ratner,SUN STAFF

Digex Inc., a Beltsville-based corporate Web-hosting company, was so coveted at the height of the Internet boom that WorldCom Inc. spent $4 billion for a parent company it didn't want just to get control of Digex. But the prize inside doesn't shine as brightly as it once did, as evidenced by the company's lackluster third-quarter earnings released yesterday. Digex reported a net loss for the three months that ended Sept. 30 of $51.2 million, or 80 cents per basic and diluted share.

That compared with a loss of $41.3 million, or 65 cents per basic and diluted share, for the comparable period in 2000.

The company's stock closed down 6 cents yesterday at $1.59 a share on the Nasdaq stock market. The stock was traded at about $45 a year ago and was as high as $150 in March 2000.

"Within this economy, we face a two-step forward, one-step back challenge," Mark Shull, president and chief executive officer, told investment analysts in a conference call after the market closed. "The one-step back will grow smaller."

Revenue increased 18 percent in the quarter, to $52.3 million, from $44 million in 2000.

Digex had 601 customers for Web hosting at the end of the quarter, down two from the earlier quarter. Digex lost 84 customers while adding 82, including Cartier, Converse Inc. and Norwegian Cruise Line.

The 1,400-employee company maintained its earlier estimates for the full year. It expects 2001 revenue in the range of $200 million to $215 million, a gross margin of 43 percent to 47 percent, EBITDA losses of $55 million to $65 million and a net loss per share in the range of $3.05 to $3.15.

"It was kind of a mixed quarter; there is still quite a bit of churn in the accounts because a lot of these dot-com clients are going bankrupt," said David Takata, an investment analyst in Los Angeles with Gerard Klauer Mattison.

"The positive stuff is that the WorldCom relationship seems to be working out well. Also, there are quite a few accounts up for grabs right now because of the bankruptcies" of Digex competitors.

Digex declined to provide guidance for 2002 until it works out a funding plan for next year with WorldCom, the large telecommunications company based in Clinton, Miss.

WorldCom bought Digex parent Intermedia Communications Inc. on July 1 for stock and debt valued at $4 billion.

To satisfy regulators, WorldCom agreed to sell Intermedia within six months, but has had difficulty doing so because of the telecommunications slump.

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