ATLANTA — EarthLink Inc. said Friday it has agreed to buy the assets of bankrupt OmniSky Corp. for $5 million, making the wireless services provider the latest to fold under the pressure of heavy debt and a scant customer base.
The deal calls for EarthLink to purchase the San Francisco-based OmniSky’s 32,000 subscriber accounts, its application platform and other infrastructure needed to continue OmniSky’s existing service.
The purchase is subject to approval by the U.S. Bankruptcy Court in San Francisco, where OmniSky plans to file for Chapter 11 protection next week. OmniSky, which began seeking a buyer in October, still could be sold to a higher bidder.
OmniSky’s demise is the latest in a string of wireless providers that have flopped financially.
On Thursday, Westboro, Mass.-based Arch Wireless filed for bankruptcy protection, hampered by $2 billion in debt.
The same day, New York-based YadaYada Inc. announced that it had ended service. YadaYada was launched in October 2000, backed by several prominent investors including former General Electric chief executive Jack Welch and former vice presidential candidate Jack Kemp.
The OmniSky deal will help Atlanta-based EarthLink expand its offerings for non-PC Internet customers, said Lance Weatherby, executive vice president of the company’s “EarthLink Everywhere” initiative.
“I look at their company and I say, ‘Wow, they’ve got a great product,”’ Weatherby said. “They have a bit of a scale problem. They didn’t get big enough, fast enough to turn a profit. And at EarthLink, we have scale.”
EarthLink has about 4.8 million subscribers.
The company believes wireless access will represent about $100 million in annual revenue by 2003, Weatherby said, declining to disclose how many new subscribers EarthLink plans to have next year. The OmniSky service will be marketed as EarthLink.
OmniSky lost $33.9 million on revenue of $5.4 million in the second quarter, and asked the Securities and Exchange Commission for permission to delay its third-quarter report pending its reorganization. The company laid off 100 employees in October.
Shares of EarthLink fell 85 cents to close at $13.80 in trading Friday on the Nasdaq Stock Market.
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