CompuServe expects to post a lost for its first quarter as a public company, officials have announced.
Company officials are blaming the expected loss on flat subscriber growth and large infrastructure and marketing investments. The quarter ends on July 31 and will be reported during the third week of August, officials say.
Wall Street has apparently taken a dim view of the news. CompuServe's stock was US$12.50 per share late yesterday, down US$3.00 from the day before.
In a separate announcement, parent company H&R Block has announced plans to spin off its remaining 80.1% interest in CompuServe by Noovember 1. H&R Block spun off the first 19.9% on April 18, when CompuServe's IPO raised US$450 million.
CompuServe had 3.4 million users as of June 30, officials says. That's just about the same number of subscribers it had two months ago. Typically, signups and usage slow in the summer, says Gail Whitcomb, a CompuServe spokesman. CompuServe also lost a number of new users, who canceled because they found the service difficult to navigate, or too slow, she says.
"We did not retain users at the rate we should have," Whitcomb says. "We are making the improvements that we need to turn this around, and we have every confidence that that is going to happen." The company expects the forthcoming introduction of CompuServe Information Manager 3.0, as well as its infrastructure improvements, to ease these problems. An alliance with Microsoft could also help: Under that deal, CIS and Wow will appear on most new PCs sold with Windows 95 starting in September.
According to one analyst, CompuServe is now paying the price for marketing and infrastructure investments that were not made when the company was a "cash cow" for H&R Block. "CompuServe has very realistically devoted new funds for marketing and system development, and that's a large reason why they've taken a loss," says Peter Krasilovsky, senior analyst with Arlen Communications in Bethesda, Maryland. "They've tried to stay competitive, and it's a shame they're being punished by Wall Street for doing so."
CompuServe has fallen a distant second to America Online, which claims to have 6 million members, most of which are in the US. CompuServe plans to switch from a proprietary format to one based on World Wide Web standards, but that will take time to kick in, as will its efforts to improve content, Krasilovsky says.
CompuServe can be reached on the World Wide Web at http://www.compuserve.com.