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Table of Contents
EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company evaluates performance of its segments based on segment income from operations. Segment income from operations includes
revenues from external customers, related cost of revenues and operating expenses directly attributable to the segment, which include costs over
which segment managers have direct discretionary control, such as advertising and marketing programs, customer support expenses, operations
expenses, product development expenses, certain technology and facilities expenses, billing operations and provisions for doubtful accounts.
Segment income from operations excludes other income and expense items and certain expenses over which segment managers do not have
discretionary control. Costs excluded from segment income from operations include various corporate expenses (consisting of certain costs such
as corporate management, human resources, finance and legal), depreciation and amortization, impairment of goodwill and intangible assets,
restructuring and acquisition-related costs, and stock-
based compensation expense, as they are not considered in the measurement of segment
performance.
Information on the Company's reportable segments and a reconciliation to consolidated income from operations for the years ended
December 31, 2008, 2009 and 2010 is as follows:
125
Year Ended December 31,
2008
2009
2010
(in thousands)
Consumer Services
Revenues
$
779,876
$
575,412
$
461,448
Cost of revenues (excluding depreciation and amortization)
255,170
183,248
143,956
Gross margin
524,706
392,164
317,492
Direct segment operating expenses
193,799
122,575
87,660
Segment operating income
$
330,907
$
269,589
$
229,832
Business Services
Revenues
$
175,701
$
148,317
$
160,764
Cost of revenues (excluding depreciation and amortization)
94,297
82,420
90,677
Gross margin
81,404
65,897
70,087
Direct segment operating expenses
49,082
40,249
50,096
Segment operating income
$
32,322
$
25,648
$
19,991
Consolidated
Revenues
$
955,577
$
723,729
$
622,212
Cost of revenues (excluding depreciation and amortization)
349,467
265,668
234,633
Gross margin
606,110
458,061
387,579
Direct segment operating expenses
242,881
162,824
137,756
Segment operating income
363,229
295,237
249,823
Stock
-
based compensation expense
20,133
13,231
9,959
Impairment of goodwill and intangible assets
78,672
24,145
1,711
Depreciation amd amortization
36,333
23,962
23,390
Restructuring and acquisition
-
related costs
9,142
5,615
22,368
Other operating expenses
54,342
46,126
30,702
Income from operations
$
164,607
$
182,158
$
161,693