CompuServe Forecasts Loss, H&R Block to Spin Off Remaining Shares
KANSAS CITY, Mo. (AP) _ CompuServe Corp. stock dropped sharply this morning after the online company said it expected to lose money in the quarter ending July 31 because of flat subscriber growth and greater spending.
The company forecast a loss of 15 to 20 cents per share for its first fiscal quarter.
CompuServe’s stock was down $3.50 at $12, a 23 percent drop, by midday on the Nasdaq Stock Market.
The company said its main online service, called CompuServe, had 3.4 million subscribers on June 30, equal to the level of April 30. Its Niftyserve operation, chiefly in Japan, had 1.8 million subscribers.
Its new Wow! online service had 91,000, 44 percent growth since April 30, and its Sprynet Internet access service 152,000, up 14 percent since April 30.
The company said it was experiencing a higher level of cancellations by new subscribers. It found people were canceling the service because of slow data speeds and experimenting with Internet-only connections.
Separately, CompuServe’s former parent, H&R Block Inc., said it will spin off its remaining 80 percent stake to shareholders by early November.
Block also announced plans to reduce the quarterly cash dividend on common stock next January, reflecting the effect on income of the CompuServe spinoff, and to buy back up to 10 million Block shares over a two-year period.
Shares of H&R Block were down $1.25 cents to $25.62 1/2, a 5 percent drop, on the New York Stock Exchange.
Block in February announced the sale of up to 20 percent of CompuServe’s stock in an initial public offering, which was completed April 19 with the sale of more than 18 million shares.
The remaining 74 million shares are to be distributed tax-free to H&R Block shareholders, who will receive about seven shares of CompuServe for each 10 shares of Block common stock.
The distribution must be approved by Block shareholders at the annual meeting in September and by the Internal Revenue Service.
Following the spinoff, H&R Block’s quarterly cash dividend is to be reduced to 20 cents per share from the current 32 cents per share. The new policy will take effect with the quarterly dividend payable in January 1997.
Block’s planned repurchase of up to 10 million shares is in addition to a previously authorized buyback of 5 million shares and will follow completion of the CompuServe spinoff.