A very good analysis by Motley Fools on may be 'questionable reasons' why ATHM is suffering?
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. |
