Turning profits, turning heads
United Online defies predictions, makes merger a success

By Deborah Crowe, Scripps Howard News Service

October 6, 2003

Rocky Mountain News
http://www.rockymountainnews.com

When Mark Goldston merged NetZero and Juno two years ago, few outsiders believed he could turn two unprofitable providers of free and low-cost Internet access into a successful business.

Two years later, United Online is making a solid profit, boasting a growing paid-subscriber base and demonstrating remarkable cash flow for an online business.

"To be candid, I knew we would get here. I just thought it would have taken another year," Goldston said.

Management hopes to make the stock more attractive to a larger pool of investors by offering increased liquidity, Goldston said.

The stock soared 280 percent in 2002 to end the year at $15.95. It was the Nasdaq's seventh-largest gainer last year. Shares have risen more then 150 percent this year.

The company has been dubbed the Southwest Airlines of the Internet for running a lean, efficient operation featuring low-cost, no-frills Internet access.

Subscribers have a choice of getting 10 hours a month of advertiser-subsidized access for free, paying $9.95 a month for regular dial- up service or $14.95 a month for "high-speed" dial-up access. The latter service is about 40 percent less than a comparable DSL connection.

The Internet service provider, with 2.55 million paid subscribers and another 2.6 million "free" users, appears to be luring Web surfers from rivals such as America Online and EarthLink, which charge more than double United Online's base rate.

The company's popularity with investors is no mystery to Michael Markowski, director of research at StockDiagnostics.com. It's the cash.

The company has a healthy bank account. United Online reported $193 million in cash at the end of its 2003 fiscal year on June 30.

Goldston said the company usually generates anywhere from $15 million to $20 million in cash per quarter.