EarthLink puts its wi-fi division on the block
Posted by: in Companies Competitive StrategyFiled under: Competitive strategy, Technology
This week, EarthLink Inc. (NASDAQ: ELNK) announced its Q4 results. There was a loss of $9.5 million, or $0.08 per share, which included a $31.1 million write-off from its wi-fi assets.
And, yes, now the company wants to offload the segment. So what does this mean for EarthLink, as well as the space?
Well, I had a chance to interview Craig Settles, who is the author of After Muni Wireless Comes to Town. According to him:
Probably the most common question this sale generates is, why would anyone want to purchase the business? It ultimately depends on how much is the asking price, and what actual assets come with the deal. If you look back at Metricom, who marketed Ricochet, they didn’t get a whole lot when they sold their business out of bankruptcy court.
Assuming there’s something worth buying, what company steps up to the plate comes down to who has the right perspective on this thing. There are a lot of local governments assessing the business case for building a network that primarily facilitates mobile government worker and asset management. If a small service provider or a company with an active hotspot business can see a way to repackage and remarket the EarthLink business to meet this need, they’re a logical buyer.
I think EarthLink’s position that there’s no money to be made with muni wireless is true, to a point, if the only thing you want to do is sell a general consumer service. And I think that anyone who buys this business with that in mind is in for trouble. There were three successive buyers of Ricochet post-bankruptcy, and I don’t believe any one of them had a winning business strategy when they plunked their checks down. But selling muni wireless as a local government resource, this can be the ticket to success.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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