Posted at 9:02 p.m. PDT Tuesday, October 19, 1999
Excite@Home turns in strong
third quarter
BY DEBORAH KONG
Mercury News Staff Writer
Excite@Home said Tuesday the number of subscribers to its
high-speed Internet service soared 35 percent in the third quarter,
while the company nearly doubled its revenue and cut its losses for
the period.
The Redwood City-based company matched analysts' earnings
expectations, reporting a pro forma net operating loss of $4 million,
or one cent per share compared with a loss of $8 million, or two cents per share, a year ago. The
FirstCall/Thomson Financial consensus estimate was that the company would lose one cent per
share.
Revenue for the quarter ended Sept. 30 rose 95 percent to $113 million compared with $58 million
a year ago. The company reported non-operational expenses of $494 million, which it said were
primarily amortization of goodwill created by the merger earlier this year of Excite and @Home.
Excite@Home added 220,000 subscribers to its cable modem service, which provides high-speed
Internet access for $35 to $45 a month. That brings the number of subscribers to 840,000, which is
four out of every 100 homes that could receive the service. In the previous quarter, it added 160,000
subscribers.
Excite@Home President George Bell said the company expects to grow to 1 million subscribers and
become profitable by the end of the year.
''We are stealing (market) share from AOL and others and that's a good thing,'' Bell said of America
Online Inc., the nation's biggest Internet access company with more than 18 million subscribers.
''This is clearly not a passing fancy . . . When you get to the million level, advertisers take you
seriously. They can't ignore you.''
Bell said he hopes that with more subscribers, advertisers will shift some of their spending from
traditional media to high-speed data services such as Excite@Home.
E-mail campaign
The company beat analysts' expectations that it would add 160,000 subscribers this quarter. ''It's
demonstrating continuous improvement,'' said Hambrecht & Quist analyst David Levy. ''The results
were very positive.''
Bell attributed the growth in subscribers to an e-mail campaign that used technology to target online
users in communities where the services are available from AT&T Corp. and other cable companies
that control Excite@Home. The e-mail described the service and its cost and included a link to a
Web page where consumers could sign up.
Another factor has been a program that targeted AOL users, trying to entice them to switch to
@Home service by giving them a rebate so they could continue to use their AOL account for a few
months while they started using @Home.
Cable modem customers and others who already have an Internet service provider can subscribe to
AOL service for $9.95 per month, plus whatever they're already paying their ISP. It was that $9.95
that Excite@Home offered as a rebate.
Bell said AT&T, which has been acquiring cable systems such as Tele-Communications Inc. in
recent months, has also shifted its focus to offering high-speed Internet service. As it rolls out that
service, he said, Excite@Home ''will be a beneficiary of their growth.''
However, the @Home service continues to suffer sporadic, localized problems, including outages. In
the Bay Area, the problems prompted the company to stop pushing its service for a time until it fixed
troubles with its network.
Traffic on the Excite Network, which includes www.excite.com, also rose to 89 million average daily
page views in September, up from 81 million in June.
By the end of the year, Excite@Home also plans to introduce a new portal that will integrate Excite's
personalization technology.
Two versions of it will be unveiled: a portal that is the default start page for customers of @Home's
high-speed Internet service with certain special features and content, and a version available to
anyone else. The portals will include streaming audio and video and more pictures and graphics.
A new ''speed select'' feature will detect the speed of a person's Internet connection and the speed
of their computer to determine whether they can access the richer, more graphically intensive content.
Company keeps focus
Michael Harris, president of Phoenix-based research firm Kinetic Strategies Inc., said
Excite@Home's subscriber growth of about 17,000 new customers a week shows the company
hasn't been distracted by speculation that Excite@Home could be split into two companies, Excite
focusing on the portal business and @Home the high-speed Internet access.
''Despite all the swirling rumors and innuendo about Excite@Home as far as operations go, it
appears to be business as usual,'' Harris said. ''They haven't been unduly distracted.''
Excite@Home shares rose $1.88 to $42.50 on electronic networks and regional exchanges after the
4 p.m. close of trading on the Nasdaq Stock Market, Bloomberg News reported. In regular trading,
the stock rose $2.06 to $40.63.
Contact Deborah Kong at dkong@sjmercury.com or (408) 920-5922.
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