Thread, re: ATHM, T, and Open Cable Implications
[I was going to post this in the ATHM thread, but for the most part I'm getting fewer and fewer replies when I do. Where-o-where did AHhaha go?]
I seldom find myself in total harmony with the fool, and today's no different. But in this
particular take of their's concerning T and ATHM I find that they may have something
of value worth contemplating. The fool uses Apple to make their point, and in the past I've used Wang to strive for the same end. It makes no difference as far as I'm concerned, because these two examples both arrive at the same level of closure.
fool.com
Enjoy, Frank Coluccio
--------------------- snip:
Shares of Excite@Home (Nasdaq: ATHM) continue to decline because people fear that it will lose its exclusive grip on the cable properties owned by AT&T (NYSE: T). I question this logic. Has Apple Computer (Nasdaq: AAPL) taught us anything? Where is the power in offering a closed system? A company must do all of the work itself. In contrast, Digital Subscriber Line (DSL) access is essentially an open standard. Over 300 companies support it and are building for it, including Cisco Systems (Nasdaq: CSCO) and Intel (Nasdaq: INTC) -- just two of the companies working on DSL together. Today, Intel announced the launch of always-on Intel DSL modems later this year. Estimates call for 2 million DSL users by the end of the year 2000, up from about 640,000 today, and closing in on cable usage estimates.
If cable lines were essentially open, most of the technology industry would move quickly to build for cable access and the technology's user-base would very likely expand more quickly. Solutions to rising traffic issues, one of AT&T's arguments for keeping access limited, would be addressed and probably solved by the entire industry. As it is, more corporate momentum is going into DSL instead.
I believe that a closed stance, on almost any issue, usually arises from a position of fear rather than one of confidence. If you have the best products, consumers will side with you no matter who the competitors are.
Anyway, cable modem has many supporters as well, most of them cable and phone-related companies as well as box makers that are beginning to install cable modems in PCs. But this is far from the consortium of giants supporting and soon pushing DSL. High-speed access also represents Internet 2, or the next stage of the Internet. Estimates are that up to 130 million people will use broadband by 2007. How many will use cable and how many DSL and satellite? Predictions abound. The Fool's July Internet Report covers broadband cable, DSL and satellite access.
Now, the main near-term event:
Excite@Home is expected to announce earnings on Tuesday, July 20. This is the first time that @Home's results will be combined with Excite's, so the company will show a few sets of numbers to make everything easier to understand. A loss for the new company of $0.02 per share is anticipated. It is still believed that the company will be profitable by year-end.
@Home ended the first quarter with 460,000 subscribers. It should have grown that number by over 35% sequentially this quarter, to 610,000 or more. One million is still the magic bogey number for year-end. Second quarter revenue should be near $90 million, up about 15% from last quarter en route to over $400 million in revenue for all of 1999, up from $48 million last year. The number of homes ready for two-way cable access should reach 17 million, up 2 million from the first quarter. Meanwhile, Excite's page views will likely increase by about 7 to 10 million from last quarter's 77 million. Excite most recently reported 28 million registered users.
Excite@Home is valued at about $17 billion, or nearly half of Yahoo! (Nasdaq: YHOO) at $32 billion. When you consider that Excite is a leading portal as well, and that with it you get @Home's cable penetration, which should reach nearly two-thirds of North American homes, the price of Excite@Home is far from crazy if Yahoo's price is anywhere near sane. Fear of open access is restraining Excite@Home's stock.
I can understand why, but I don't necessarily agree with it. Even if AT&T opens its cable lines, @Home will retain a fat lead and many advantages over competitors. Remember: literally dozens of long-distance services are available through common phone lines, but most people use the leading names (AT&T, MCI, and so forth) for obvious reasons: marketing power, brand name, and these are often the "default" providers. That's convenience.
However cable access rights evolve, Excite@Home should land at, or near, the top of the industry. Management would need to blunder worse than Charlie Brown to lose its position. For thoughts from someone who knows the related legal issues inside and out, read this excellent Post of the Day on Excite@Home from a Fool named Supertanker, who is a municipal attorney.
So, next week we'll see results from Amazon.com (Nasdaq: AMZN), America Online (NYSE: AOL), and Excite@Home (Nasdaq: ATHM). Wednesday we previewed America Online's results. Today, we considered Excite@Home's quarter. We have no information from Amazon, although we mentioned possibilities on Tuesday after the toy store announcement.
Amazon's revenue should rise ghostlike (with seemingly little effort) to the $300 million level this quarter following last quarter's $293 million. Amazon's sales have risen from below ground level to surely top $1 billion this year. Of course, the effort has truly been tremendous, and barriers to reaching $1 billion in online sales for new companies are high and rising. Most new companies will be weighed down with chains.
Soon, either here or when writing a Fool News article, I want to discuss the several new broadband companies that have been coming public. Until next time, be Foolish. And remember: quarterly results are short-term results only. Invest for the long-term.
Fool on! |
