EarthLink Closes New Edge Acquisition

EarthLink Inc. said yesterday it has completed the acquisition of New Edge Networks for 2.6 million shares of EarthLink common stock and $114.3 million in cash.

The ISP bought New Edge Networks in an effort to better target SMBs, which are the VPN providers niche market.

EarthLink had to meet several regulatory approvals, including granting options to purchase up to 657,000 shares of its common stock to New Edge Networks employees. EarthLink also granted New Edge Networks employees restricted stock units for 295,000 shares of EarthLink common stock under its stock incentive plan. Approximately 250 New Edge Networks employees further are receiving stock under a different options plan.

Analysts see EarthLinks takeover of New Edge Networks as another way the ISP is diversifying beyond its dialup Internet business as it sees a technological future that will not accommodate such a waning niche. The ISP already has begun diversifying; it operates divisions focused on wireless, VPNs and high-speed Internet, and has entered into a joint venture with South Korea Telecom to launch an MVNO.

New Edge now is a wholly owned subsidiary within EarthLinks Value and SME group. It will continue operating under its name (the official branding is New Edge Networks An EarthLink Company), retain its own OSS systems and remain in its Vancouver, Wash., headquarters. Also, there are no plans to close any New Edge locations, reduce headcount or eliminate members of the executive team. Dan Moffat will keep his position as New Edges president.

New Edge Networks expects to expand its service offerings, step up its marketing and sales campaigns, expand its network, and enhance back-office systems, Moffat said in a news release.

EarthLinks shares were up 3 percent at mid-morning on Friday, trading at $9.48.

EarthLink www.earthlink.net
New Edge Networks www.newedgenetworks.com