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The Kelsey Report® Advisory

The (2Q) Results Are In for Switchboard, RHD
Charles Laughlin , 7/30/2001

Issue: R.H. Donnelley, Switchboard Results a Window into YP Industry

News: Several leaders in the print and online Yellow Pages and directory space reported second-quarter earnings last week, including directory sales agent R.H. Donnelley and online directory provider Switchboard Inc.

R.H. Donnelley gained results from its efforts to boost earnings through increasing efficiencies and debt reduction. The company is also nearing the end of its stock-buyback program, which was designed to boost its share price. Second-quarter earnings per share were up about 27 percent over the second quarter of 2000. The company's DonTech (a perpetual joint venture with SBC Directory Operations) and Sprint operations showed modest sales growth during the first half of 2001. The slowing economy is having an impact on R.H. Donnelley's operations, in particular on the bad debt ratio in its Sprint markets, especially Las Vegas. Improved results in the DonTech region were in large part attributed to improved billing and collections procedures implemented by SBC.

Meanwhile, posted a $5.8 million loss for the quarter on revenues of $4.7 million. But the company maintains it will become cash-flow positive by the fourth quarter. Switchboard projected it will end the year with revenues of $24 million. Furthermore, it forecast $40 million in revenues for 2002. The company is basing its outlook on the quality and predictability of several recent partnerships, including AOL (which will not completely roll out until later this year), the Berry Co. and TransWestern Publishing.

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