Updated from 2:38 p.m. EST
fell sharply Tuesday after the Internet service provider reported that its operating loss more than doubled in its fourth quarter, although the results came in slightly better than Wall Street's forecasts and were in line with the company's previously announced earnings warning.
The company also announced the resignation of its chief financial officer, Edward D. Postal.
PSINet's stock dropped 6 15/16, or 15%, to 38 7/8 by late morning Tuesday, amid a broader selloff in technology stocks. (PSINet stock closed Tuesday down 5 11/16, or 12.4%, at 38 3/4.)
Excluding acquisition-related costs, PSINet posted a fourth-quarter operating loss of $134.8 million, or 99 cents a diluted share, compared with an operating loss of $53.2 million, or 51 cents a share, in the fourth quarter of 1998.
Analysts surveyed by
First Call/Thomson Financial
had forecast a loss of $1.01 a share in the latest quarter.
Including $88.7 million in acquisition-related costs, PSINet's net loss widened to $223.5 million, or $1.63 cents a diluted share, in the latest quarter, compared with a loss of $132.6 million, or $1.28 a share, a year earlier.
The losses came amid rapidly growing revenues. For the fourth quarter, revenues were up 97% to $185.4 million, and total 1999 revenues grew 114% to $555 million.
The results were in line with a
warning PSINet issued on Jan. 10. The company attributed the wider net loss mainly to depreciation and amortization of the company's large investments and growth in Internet infrastructure in recent years.
Some analysts said that while the growth-related charges are weighing on earnings now, they are an understandable side effect of the company's strategy to build a massive Internet infrastructure.
"They are buying a lot of equipment, and the more aggressive they are in the near term, the larger these operating expenses are going to be in the near term," said Dan Renouard, vice president and analyst at
Robert W. Baird & Co.
Renouard said that news of Postal's resignation amid a broader selloff in technology stocks was the primary reason behind the drop in PSINet's shares Tuesday.
In a conference call Tuesday, PSINet Chief Executive Officer William A. Schrader said the company remains on track to profitability in 2000.
Schrader said company's performance this year should measure up to its previously announced expectations, which includes targets for revenue of about $1.1 billion in 2000, and earnings of $120 million. He also expects earnings to roughly double each year over the following two years.
He also dismissed any notion that the company could be acquired. "We have exactly what the largest telephone companies want -- network, hosting, expertise, and customer base -- but at this point, we're not for sale," said Schrader.
PSINet acquired 14 Internet service providers during the fourth quarter, which added about $23.4 million in revenue, and made 43 total acquisitions in 1999.
The company reported Postal's resignation as chief financial officer along with its earnings, noting that Postal has taken a position with
, a private Washington D.C.-based Internet company. PSINet said it is searching for his replacement.
For all of 1999, the company reported a net loss of $433.9 million, or $3.49 a share, vs. its 1998 loss of $264.9 million, or $2.66 a share.