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Table of Contents
EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Information on the Company's reportable segments and a reconciliation to consolidated income from operations for the years ended
December 31, 2007, 2008 and 2009 is as follows:
The primary component of the Company's revenues is access and service revenues, which consist of narrowband access services (including
traditional, fully-featured narrowband access and value-priced narrowband access); broadband access services (including high-
speed access via
DSL and cable, VoIP and managed IP-based networks); and web hosting services. The Company also earns revenues from value-
added services,
which include ancillary services sold as add-on features to the Company's access services, search and advertising revenues.
Consumer access and service revenues consist of narrowband access and broadband access services. These revenues are derived from fees
charged to customers for dial-up Internet access; fees charged for high-
speed access services; fees charged for VoIP services; usage fees;
shipping and handling fees; and termination fees. Consumer value-
added services revenues consist of revenues from ancillary services sold as
add-
on features to the Company's Internet services, such as security products, premium email only, home networking, email storage and Internet
call waiting; search revenues; and advertising revenues.
104
Year Ended December 31,
2007 2008 2009
(in thousands)
Consumer Services
Revenues
$
1,025,408
$
779,876
$
575,412
Cost of revenues
324,465
259,851
186,570
Gross margin
700,943
520,025
388,842
Direct segment operating expenses
506,975
207,236
131,154
Segment operating income
$
193,968
$
312,789
$
257,688
Business Services
Revenues
$
190,586
$
175,701
$
148,317
Cost of revenues
118,232
101,069
87,185
Gross margin
72,354
74,632
61,132
Direct segment operating expenses
58,548
51,276
41,975
Segment operating income
$
13,806
$
23,356
$
19,157
Consolidated
Revenues
$
1,215,994
$
955,577
$
723,729
Cost of revenues
442,697
360,920
273,755
Gross margin
773,297
594,657
449,974
Direct segment operating expenses
565,523
258,512
173,129
Segment operating income
207,774
336,145
276,845
Stock
-
based compensation expense
19,553
20,133
13,231
Impairment of goodwill and intangible assets
4,250
78,672
24,145
Amortization of intangible assets
14,672
13,349
7,749
Facility exit and restructuring costs
65,381
9,142
5,615
Other operating expenses
55,884
50,242
43,947
Income from operations
$
48,034
$
164,607
$
182,158