New Edge Networks acquired by EarthLink

By Shane Cleveland
VBJ Staff Reporter
Vancouver-based New Edge Networks has been acquired by EarthLink Inc., an Atlanta headquartered Internet service provider, for approximately $144 million, including 2.6 million shares of EarthLink common stock and $114.3 million in cash. New Edge Networks builds and manages broadband networks for businesses and communications carriers and is expected to generate approximately $120 million in revenues in 2005.

EarthLink said it plans to retain New Edge Networks’ 345 employees and the New Edge Networks brand and operate the company as a wholly-owned subsidiary of EarthLink. New Edge Networks will continue to operate out of Vancouver. Dan Moffat will remain as president of New Edge Networks. The company was founded by Moffat in June 1999.

The acquisition of New Edge Networks enables EarthLink to expand its business in the small and medium business market and gives EarthLink one of the largest data communications networks in the country.

Gary Betty, president and CEO of EarthLink, said the acquisition helps the company in its initiative to become a “total communications company.”

“We believe New Edge is a great company and offers EarthLink a significant opportunity to quickly and cost effectively enter the fast growing U.S. small and medium enterprise market,” said Betty, during a conference call.

The two businesses will combine their voice, data, protection and security tools designed to meet a growing demand for high-speed access by small office and home office users and small to medium-sized businesses, according to EarthLink.

The acquisition, which is subject to regulatory approvals and closing conditions, is expected to close in the first quarter of 2006.

Earlier this year, Deloitte & Touche USA LLP and Inc. magazine each named New Edge Networks on their respective list of the fastest growing 500 companies.

The Vancouver company made its debut at number 67 on the Deloitte Fast 500 list of fastest growing technology companies in North America. New Edge Networks’ revenue grew 3,654.2 percent from $3.1 million in 2000 to $115.1 million in 2004. Inc. magazine ranked New Edge Networks number 283 on its 24th annual ranking of the 500 fastest growing private companies in America. New Edge Networks was the 11th fastest growing communications/networking company on the Deloitte list, and it ranked number 18 among communications providers on the Inc. 500.

EarthLink posted $1.38 billion in revenue for 2004. EarthLink had third quarter revenues of $317 million, a decline of 8 percent versus the previous year. Net income was $36.4 million, down 3 percent. As of Sept. 30, 2005, EarthLink had 5.3 million total subscribers, off 1.4 percent.

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