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Summary:

Every month, my friends at Thomson Financial send me a spread sheet of insider buying and selling, which I use as an early warning system for events that may happen in the near future. So in the August 2004 edition I found two starkly different but […]

Every month, my friends at Thomson Financial send me a spread sheet of insider buying and selling, which I use as an early warning system for events that may happen in the near future. So in the August 2004 edition I found two starkly different but still correlated bits of information. Earthlink Director Linwood Lacy purchased 120,000 shares, the first buy here in 2 years. Now to the second bit of information in the insiders report.

United Online, you know the one with those cheesey mall ads, and crappy dial-up. Well insiders sold nearly $4 million worth of stock including chief financial officer Charles Hillard. This is the first insider selling since November 2003, at a price which is near its 52-week low. Stock has plunged nearly 70% over past 12 months. The relative subscriber values of two companies are $298 and Z$198

What does that tell you? Perhaps Earthlink is expecting some better times ahead. The broadband/wireless trend and Earthlink’s willingness to work with every available option is one of the reasons the company is doing well. The company is buying more co-lo space from Level 3, and has signed a new reselling agreement with Sprint. It is even experimenting with WiMAX, Fixed Wireless and Power Line Broadband. With nearly 51% of American Internet users connecting via high speed Internet, looks like Earthlink backed the right horse.

By Om Malik
  1. where did you get that ELNK is buying MORE COLO from Level3????????/ With the roll out of VOIP, seems Level3 would SELL MORE COLO to everyone with everyone NEEDING to be “””ON NET””” to get the Voip applications and benefits of being “”ON NET”” with Level3!

    Skibare

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  2. Om -

    so if you’re a betting man, would you put your money where your observation is and do a long/short hedge on ELNK / UNTD ?

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  3. Now I am a betting man, who can’t offer you any advice on this one! why? because I don’t want to step into the gray area of being a reporter and an analyst. we report, you decide. except we mean it

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  4. Well, the Earthlink/United pair trade has been very popular…..but most of it is played out – UNTD is down big…

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  5. i think while the trade is played out, the buying selling shows that thigns might be better or worse than we think they are

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  6. I think buying Earthlink may have some legs, but shorting United may be an unwise decision at this point, at least short term. With $200m in cash, and an enterprise value of $400m, with revenue of $600m, it is now trading at a pretty low level. All that said, the bad usually gets worse.

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