EarthLink to Acquire New Edge Networks

Will allow ISP to expand SOHO, SME business

Published in CSP Daily News

ATLANTA -- Major Internet service provider (ISP) EarthLink Inc. has forged an agreement to acquire New Edge Networks, a privately-held single-source national provider of private Virtual Private Networks (VPNs) and secure multi-site managed data networks and dedicated access for businessesincluding convenience stores and petroleum retailersand communications carriers.

Under the terms of the deal, EarthLink will acquire 100% of New Edge Networks in a merger transaction for approximately $144 million, consisting of 2.6 million shares of EarthLink common [image-nocss] stock and $114.3 million in cash, including cash to be used to satisfy certain liabilities. The acquisition, which is subject to regulatory approvals and customary closing conditions, is expected to close in first-quarter 2006.

The acquisition of New Edge Networks will enable EarthLink to expand its business in the small- and medium-sized business market. The company will give EarthLink one of the largest data communications networks in the country and a customer base that is expected to generate approximately $120 million in revenues in 2005.

Together, EarthLink and New Edge Networks will be able to package their voice, data, protection and security tools to meet the demand for high-speed access and VPN services by both small-office and home-office (SOHO) users as well as small- and medium-enterprise (SME) customers.

New Edge Networks is a tremendous growth platform for EarthLink to compete in the rapidly expanding SME networking market, said Bill Heys, president of Atlanta-based EarthLink's value and small-to-medium enterprises business unit. This acquisition builds upon our existing suite of award-winning services for small businesses and gives New Edge Networks the added resources to strengthen its market position.

EarthLink plans to retain New Edge Networks' 345 employees and the New Edge Networks brand and operate the company as a wholly owned subsidiary of EarthLink. New Edge Networks will continue to be based in Vancouver, Wash. Dan Moffat will remain as president of New Edge Networks after the acquisition is completed.

Meanwhile, New Edge Networks has established a direct network connection to American Express, enabling merchants to process transactions directly with the card network. The always-on direct connection helps businesses speed up transactions and cut processing costs.

Through redundant high-speed direct connections, merchant transactions are sent directly to American Express for authorization, eliminating fees that third parties charge for processing, the company said. Previously, some merchants established and paid for their own connections to a payment processor or gateway.

Use of the direct connections to American Express is included in the price of broadband networks from New Edge Networks. Transaction times over broadband connections take as little as two seconds compared to about 15 seconds over a dial-up connection, said the company. This speeds up lines at the retail checkout lanes and improves overall customer experience.

Direct connections are part of a New Edge Networks initiative called ARNie, (America's Retail Network information exchange). New Edge Networks is establishing direct connections with various suppliers to retail merchants.

Through its nationwide network of more than 850 switches and Internet routers, New Edge Networks uses various broadband access technologies for building business networks. These include all types of DSL, frame relay, ATM, cable modems and satellite. Its network coverage reaches 100% of U.S. business addresses.