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CompuServe cuts losses
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August 20, 1997: 7:46 p.m. ET
Deficit of 4 cents per share beats Wall Street expectations of 7 cents
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NEW YORK (CNNfn) - CompuServe Wednesday reported its sixth consecutive quarterly loss, but the company sharply reduced the damage even more than expected.
Analysts had expected a loss of 7 cents per share, but the Internet service provider posted a loss of $4.1 million, or 4 cents per share, on revenues of $206 million. In the year-ago period, CompuServe lost $17.1 million, or 19 cents per share, before one-time charges of $209 million.
As previously reported by CNNfn, CompuServe formally announced plans to introduce a $24.95 per month flat-rate pricing option in the U.S. and Canada, a more expensive option than offered at rival America Online.
"Users wanting the flat-rate option said CompuServe's added value is worth $24,95 per month, compared with the typical $19.95 monthly flat-rate fee charged by mass consumer online services," CompuServe chairman Frank L. Salizzoni said. "We believe the new flat-rate option is an appropriate step as we work to reverse the decline in our U.S. subscriber base during the past year."
CompuServe closed the quarter with 2.6 million subscribers, down from 3.1 million a year ago. The company said its first-quarter revenue decline was due primarily to the subscriber slump.
The company said Tuesday that four major international networks will help carry Net traffic throughout Europe and Asia -- another example of a U.S. Internet service looking to overseas markets, where growth is often faster than at home.
CompuServe said its first-quarter improvement was driven by a three-percentage-point increase in gross margin to 43 percent, up from 40 percent in the fourth quarter. Gross margin in the 1996 first quarter was 33 percent.
Additionally, CompuServe said it will receive just over $70 million from its majority owner, H&R Block, in September. The money reflects the tax benefit to H&R Block resulting from CompuServe's loss in calendar year 1996. 
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