Deutsche Bank Comments On CBeyond Ahead Of Earnings Release

Deutsche Bank reiterates its HOLD rating for CBeyond CBEY heading into 4Q results due to continued concerns on ARPU pressure. While 4Q results and the initial 2011 outlook will likely benefit from the contributions of CBEY's recent acquisitions, Deutsche Bank expects continued economic pressures on CBEY's SMB customer base and further ARPU deterioration to weigh on underlying operating performance in the near term. Deutsche Bank expects the lower pricing strategy introduced last March to continue to drive th results during the 4th quarter. Specifically, it expects 4.1K in gross customer adds, which would be the 3rd consecutive quarter of sequential improvements since service bundles were introduced. However, DB continues to expect ARPU pressure as more customers are rolled into these lower-priced plans. Deutsche Bank's forecast for ARPU ($685) is down $10 sequentially and $42 YoY. Deutsche Bank's 4th quarter results include ~$2M of revenue contributions from the acquisitions of MaximumASP and Aretta Communications at 30% EBITDA margins. Adjusting for these contributions, DB's 4th quarter estimates for revenue and EBITDA are $115.4M and $17.8M, respectively. Deutsche Bank has a $14 PT and Hold rating on CBEY CBEY closed Tuesday at $13.80