CompuServe Corp, the oldest on-line service provider and monkey on the back of its majority shareholder, H&R Block Inc, yesterday turned in very heavy losses for the fourth quarter and year, much worse than Wall Street expected. The numbers exacerbated by charge for write-downs for closing some of its proparty around its headquarters, equity investments […]
CompuServe Corp, the oldest on-line service provider and monkey on the back of its majority shareholder, H&R Block Inc, yesterday turned in very heavy losses for the fourth quarter and year, much worse than Wall Street expected. The numbers exacerbated by charge for write-downs for closing some of its proparty around its headquarters, equity investments in content providers and the closure earlier this year of its short-lived Wow! so-called family-oriented service. That closure signaled a reversal in strategy for the company as it started going after business users. Shortly after that, America Online Inc made advances towards the company according to reports, but had at least two share swap offers rebuffed after long talks. AOL was thought to be offering between $11 and $14 peer share, valuing CompuServe at around $1.2bn. But now AOL is believed to have given up on the idea of buying all of CompuServe, which would give it a bigger European presence, and may go back for pieces at some point. CompuServe says it is still in talks with an outsider but it wouldn’t say whether it was the same company it been talking to all along. CompuServe shares are trading just above $10 now. H&R Block has made it clear it wants shot of CompuServe, but probably does not relish the idea of swapping it for AOL shares. These talks have also put the search for a new chief executive on hold. Chairman Frank Salizzoni is acting chief executive has been holding the fort since Bob Massey resigned with no job to go to back in February. Salizzoni described the fourth quarter as encouraging in some respects and disappointing in others. He claimed the company had made strides towards its goal of profitability by the second half of next year (CompuServe last made a yearly profit in 1994) and he expects further improvement in earnings and cash flow in the quarters to come. Well, that’s one way of looking at it. Ironically for a company 80% owned by H&R Block Inc, it’s taken a long time to report its fourth quarter and year-end figures for the period ending April 30. Net losses for the quarter were $18.0m, after a $9.2m charge for write down of equities and office facilities, up from losses last time of $1.1m, on revenues that fell 3.3% to $207.9m. First Call estimates were looking for losses of $0.09 in the quarter, against the $0.13 reported net of charges. The Columbus, Ohio company now highlights the number of corporate customer wins it has, rather than consumers. Net losses for the year to April 30 were $119.8m, after an $80.1m charge for restructuring, the closure of the Wow! Service, accelerated amortization and the quarterly charge, against profits the previous year of $49.1m, on revenues that rose 6% to $841.9m. Some 49 companies signed up to its Network Services internet/intranet services in the quarter to bring the total to 1,200. Revenues from the group grew 27% to $69.5m, representing one third of the company’s revenues. In the year, 237 companies were added for revenues of $257.6m, or 30.5% of the total. Overall CompuServe subscriber numbers crept up from 5.34 million to 5.37 million in successive quarters. US subscribers fell 127,000 to 1527,000 as the company cut back its recruitment drive at home. Europe was up 19,000 to 892,000, while Japan rose to 2.33 million, from 2.18 million. Cash flow in the year was negative to the tune of $141.9m, leaving the company with $138.8m at the year-end, but it was cash-flow positive to the tune of $15m in the fourth quarter.