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Covad Shares Continue to Climb

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Golden_Cross Member Level  Tuesday, 03/21/06 04:18:41 PM
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Covad Shares Continue to Climb
Tuesday March 21, 12:37 pm ET
Covad Communications Shares Advance for Second Day on Earthlink Financing Deal

NEW YORK (AP) -- Shares of Covad Communications Group Inc. climbed for a second day Tuesday, as investors continued to view the company's extended relationship with Earthlink Inc. a good sign.
Last week, the communications service provider said it received $50 million in financing from Earthlink to fund the expansion of its voice services to eight new markets.


"The bottom line -- this is a critical step for Covad," wrote Kaufman Bros. analyst Ari M. Moses in a client note, reiterating a "Buy" rating on the company.

Not only has the company converted a market trial into a commercial launch, he wrote, "but also will upgrade a portion of the company's network that currently accounts for 70 percent of revenue and will be doing so on someone else's dime."

Moses said the transaction "should effectively be cash neutral" for Covad. He added he does not expect revenue contribution from the new venture in 2006, and has "modest expectations" for 2007.

Covad's shares rose 18 cents, or 9 percent, to a new 52-week high of $2.19 in midday trading on the American Stock Exchange. The stock closed up nearly 16 percent Monday, after an analyst upgraded the company seeing improving financial performance.

In the past 52 weeks, the stock has changed hands between 65 cents and $2.02.

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