EarthLink ( ELNK) shares surged 13% after the Internet service provider posted strong numbers, bouncing back from a year-end setback.

The Atlanta-based company beat bottom-line estimates for its first quarter and raised earnings guidance for the year. EarthLink, which cut 1,300 call-center employees in the quarter, says it has better-than-expected telecommunications savings and operational efficiencies to thank for its improving performance.

In the period ended in March, the company added nearly 100,000 subscribers each to its high-speed Internet service and its cut-rate PeoplePC Online discount brand. Continuing a trend of losses from previous quarters (and mirrored by Time Warner's ( TWX) dial-up America Online service), EarthLink lost 96,000 subscribers to its traditional, narrowband flagship service.

On Tuesday morning, EarthLink's shares rose $1.17 to $10.26.

For the first quarter ended March 31, EarthLink reported revenue of $351.6 million, down from $353.7 million in the first quarter of 2003 but in line with the Thomson First Call consensus of $350 million.

On the basis of generally accepted accounting principles, the company reported a net loss of $11.8 million, or 7 cents a share, compared to a year-earlier loss of $65.7 million or 43 cents per share.

The latest quarter's loss includes "facility exit costs" of $30.2 million associated with EarthLink's closure of four call center facilities. That figure includes personnel and related costs of $10.5 million, real estate and service termination costs of $11.3 million, and fixed asset disposals of $8.4 million, according to EarthLink. The company reported similar costs of $36.6 million one year earlier.

Excluding the facility exit costs, the company says it reported earnings of $18.4 million, or 11 cents per share, beating the First Call number of 7 cents per share.

Looking ahead, EarthLink raised several of its three-month-old operational and financial forecasts for the year.

Earnings before interest, taxes, depreciation and amortization -- and before facility exit costs -- will be approximately $170 million to $190 million, says the company, up from a range of $135 million to $155 million. GAAP net income for the year is now expected to be in the range of $54 million to $80 million for the year, up from the prior range of $13 million to $39 million.

The company nudged upward its guidance for the number of paying subscribers it expects to add this year, from a range of 250,000 to 550,000 to 300,000-550,000 subscribers.

Revenue expectations, says EarthLink, remain unchanged in the range of $1.41 billion to $1.44 billion.

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