EarthLink (ELNK Quote - Cramer on ELNK - Stock Picks) and Sprint (FON Quote - Cramer on FON - Stock Picks) have terminated the exclusive terms of their alliance created in 1998 and eliminated a provision that would have allowed the long-distance telephone company to acquire the Internet service provider.
In a joint statement, the companies said Sprint, which is based in Kansas City, Mo., will continue to own shares in EarthLink but will relinquish its seats on the company's board. Sprint originally had the right to launch an acquisition offer for EarthLink starting in September of this year, but will now retain only the right to respond to third-party takeover attempts with a bid of its own.
As a result of the changes in the agreement, EarthLink, based in Atlanta, will take an $11.3 million noncash charge in the first quarter of 2001 to write off intangible assets related the companies' original marketing pact.
The companies also said this morning that they will no longer co-brand their Internet offerings. For the near term, Sprint will continue to market the EarthLink Sprint co-branded service to its dial-up customers, but the phone company may in the future use EarthLink's Internet application set on a wholesale basis, for both narrowband and broadband products, and market them as Sprint services.
Services to existing customers won't be affected by the changes in the relationship between Sprint and EarthLink.
Shares of EarthLink gained $1.09, or 12.3%, to $10 in recent
Nasdaq trading. Sprint lost 53 cents, or 2.2%, to $24.12 on the
New York Stock Exchange.
Yi Ping Ho
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