Freeserve Announces Wider Loss; Nervous Investors Damp Shares
By Stephanie GrunerStaff Reporter of The Wall Street Journal
LONDON -- Shares in Freeserve PLC tumbled after Britain's largest Internet-service provider announced a widening quarterly loss. But the reaction says more about investor nervousness than Freeserve's performance, analysts said.
In line with forecasts, Freeserve, the U.K.'s first big Internet stock, said its operating loss before exceptional items for the 16 weeks ended Aug. 21 grew to 5.2 million pounds ($8.6 million or 8.2 million euros), from 810,000 pounds for the previous 12-week period ended May 1.
Sales growth, however, exceeded analysts' expectations. The company said revenue more than doubled to 3.38 million pounds from 1.65 million pounds. Despite a summer slowdown in the Internet-service provider sector and the entry of more than 200 competing free ISPs, including AOL Europe's Netscape Online, Freeserve managed to increase registered users 19% to 1.40 million, from 1.18 million. It also increased its customer-retention rate and captured a share of nearly 30% of the British ISP market.
Although the numbers were in line with expectations, investors sent the stock down by 8.2%, or 12.25 pence, to 137.75 pence. Analysts said the fall reflected market volatility in the Internet sector more than disfavor with Freeserve. The stock has been seesawing in recent weeks, with a rise of 11% on Monday. "In a fair world, the share price should have gone up" after the results announcement, said Nick Bubb, an analyst with SG Securities in London.
Freeserve has enjoyed a surprisingly short honeymoon with investors. Less than two months after its shares were listed on the London Stock Exchange and the Nasdaq Stock Market, raising net proceeds of more than 120 million pounds, Freeserve's stock price has recently been struggling to exceed its initial offering price of 150 pence.