EarthLink Connects

Driving down a steep mountain road after a weekend on the slopes of Big Bear in Southern California, EarthLink Network (ELNK) founder Sky Dayton and his promising COO candidate, Charles "Garry" Betty, had an unexpected chance to see how well they worked together. A storm the previous night had covered the road with a slick layer of ice and snow, and the way ahead was obscured by a swirling blanket of fog.

Although an avid snowboarder, Dayton hadn't brought chains for his BMW M5. He remembers thinking he wouldn't make it off the mountain. But Betty took charge from the passenger seat and coached Dayton through every mile of icy, hairpin curves.

The 1996 ski trip was the then 24-year-old Dayton's idea of a final interview for Betty, a Georgia native 15 years his senior. Betty got the job at the fledgling ISP and rose to CEO six months later.

Dayton and Betty may be nearly a generation apart, but their close working relationship lies at the heart of the company's success. Dayton, an ambitious GenXer who never went to college, started EarthLink on little more than a dream, but it was the industry-wise Betty who took Dayton's vision and ran with it.

At a time when most consumer ISPs still counted customers in the thousands and analysts regularly issued dire warnings of telephone companies and cable operators engulfing the industry, the two men transformed EarthLink from a small Southern California outfit to a national powerhouse. In three years, EarthLink has amassed more than 500,000 subscribers, seen revenue more than triple to $79.2 million in 1997 and watched its stock price soar. Since the company's January 1997 initial public offering, EarthLink stock rose from $13 to a high of $77 before slipping lately to $58.375, giving it a market capitalization of $610.9 million.

The secret of Dayton's and Betty's success has been equal parts intuition, luck, timing and moxie. Colleagues and analysts credit Dayton with a keen ability to act early on trends: He leased bandwidth rather than build his own network infrastructure and dropped prices to $19.95 a month for unlimited access before other ISPs saw the wisdom of flat rates.

Time and again, Dayton and Betty have also found ways to raise cash from public markets and private investors just when they needed it most. This week, EarthLink expects to close a deal with Sprint that analysts calculate is worth about $180 million in cash, credit lines and new subscribers. EarthLink is looking to raise another $174 million in a secondary stock offering set to take place later this month. Fueled by the new funding, analysts believe EarthLink could become the nation's No. 2 consumer gateway to the Net by 1999.

But questions remain about the future of the EarthLink Sprint (dossier) deal. EarthLink has yet to make a nickel, and won't for at least another two years because of write-offs associated with the deal, according to analysts who follow the stock. Likewise, Sprint could prove more of a hindrance than a help to EarthLink. A latecomer to the consumer dial up business, Sprint has seen its Internet Passport service flounder while the company invested in other areas. And executives at both companies won't rule out the possibility that Sprint could buy EarthLink after a three-year hands-off period spelled out in their deal.

If Dayton has his way, though, EarthLink will still be independent in the future - and he'll still be running it. "Somebody has to be out way ahead saying we have a long way to go," he says. "It doesn't keep me up at night, but I do worry. Are we talking to customers? Is our present technology palatable? Our bread and butter for many years to come will still be getting people connected."

The Internet was relatively unexplored territory when Dayton first caught wind of it in 1993. As a teenager, he had tinkered with