Excite At Home's Future is Uncertain With AT&T's Woes and Slowing Ads
By MYLENE MANGALINDAN
Staff Reporter of THE WALL STREET JOURNAL
Excite At Home Corp. is looking increasingly like Excite At Risk.
Many Wall Streeters were incredulous last week when Excite At Home announced it needs to raise money to sustain it through year's end. The company, which has a Web portal and provides fast connections to the Internet through cable-television pipes, had earlier this year raised $185 million, which it said at the time would keep it going through 2001.
But Excite At Home's future depends on a lot more than new financing: Its fate hinges largely on what happens to AT&T Corp.'s broadband and cable unit. AT&T Broadband was scheduled for a public offering later this year, at which time it was supposed to receive AT&T's 23% stake and 74% voting control of Excite. But the IPO was delayed, and the unit's future is anybody's guess. Comcast Corp. has made an unsolicited bid for AT&T Broadband, and AT&T is now receiving overtures from AOL Time Warner Inc. Other suitors may come calling, and whoever ends up with AT&T Broadband ends up with AT&T's stake in Excite At Home -- a once-stellar property that has gotten lost in the shuffle.
"It's disappointing that a business that at one time had such enormous promise, and to a large degree has performed its core functions, has come to this point in its life where it has to struggle for existence," says cable pioneer John Malone, the mastermind behind the At Home (Internet access) half of the company. "Tragic might be too strong of a word, but it is disappointing."
Patti Hart can't dispute that. She joined Excite At Home, which is based in Redwood City, Calif., as chief executive on April 23. Anticipating the prospect of "building on a foundation that's pretty solid," as she put it, she instead found herself at the helm of a money-losing company with an unexpected revenue plunge and a cash crunch. So, instead of building, Ms. Hart has been preparing to dismantle and sell blocks of that foundation while trying to keep the rest from crumbling.
Ms. Hart has let it be known that key Web assets, including the Excite.com site itself, are available if the price is right. She has considered farming out the Internet-access operations. And she has gone door-to-door pleading for funding.
It was just six weeks ago that Excite At Home announced it had raised $85 million from AT&T. The company also agreed to put up most of its assets as collateral for a $100 million financing from Promethean Asset Management and Angelo, Gordon & Co. Inc. -- both known as lenders offering stringent terms to troubled companies.
All the while, Ms. Hart has been operating under the shadow of AT&T. Should that company succeed in its original plan of spinning off AT&T Broadband, Excite At Home may have a shot at becoming a third-party wholesale broadband provider, says Abhishek Gami, an analyst at William Blair & Co. Excite At Home could generate revenue by helping Internet-service providers such as Juno Online Services Inc. or EarthLink Inc. manage the computer network that connects to the cable-TV pipes.
Excite At Home Posts Quarterly Loss as Media 'Uncertainty' Hurt Results (July 24)
Head of Excite Europe to Leave After Excite At Home's Closures (June 29)
Excite At Home's media assets are quite another story. The Excite portal, the Blue Mountain Arts electronic-greeting card site and the Matchlogic direct-marketing aren't alluring buys. Comcast and others have considered buying the portal, according to people familiar with the talks. But the best offer to come in was substantially less than $100 million, says one person who considered buying the portal.
At the time of Ms. Hart's arrival, she insisted that the company's media properties weren't in fire-sale mode. The urgency has increased as Excite's portal, like other media businesses, deteriorated rapidly this year. The online-advertising slowdown has only exacerbated the company's media-revenue decline, resulting in two straight quarterly warnings about lower ad revenue and funding needs.
Many insist Excite At Home should either shut down its media businesses or sell them. Though Excite At Home reiterated last week it is still looking for buyers, few are likely to materialize because no one wants to be saddled with an advertising-dependent business during an ad slowdown, analysts say. AOL, which owns content such as magazines, may be more willing to absorb Excite At Home's flagging portal as well as its network infrastructure, they say.
Some say resolution of AT&T Broadband's destiny may not help Excite At Home in the long run. The company's problem may be that "they've never been fully in charge of their own destiny," said Arthur Newman of ABN Amro. "It's not clear they are in a strong enough position to hold their own against an EarthLink, much less an AOL Time Warner."
-- Leslie Cauley contributed to this article.
Write to Mylene Mangalindan at mylene.mangalindan@wsj.com |
