Some of this story from wsj may be new
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Analysts Applaud Excite@Home Cable Subscriber Growth
By PAULA L. STEPANKOWSKY
(This story was originally published late Tuesday.)
LONGVIEW, Wash. -- In its first full quarter as a combined company, Excite@Home Inc. (ATHM) reported 1999 third-quarter revenue Tuesday that exceeded Wall Street expectations and a pro forma net loss of 1 cent a share, excluding charges, that met expectations.
Analysts said they were positively surprised at subscriber growth for the company's high-speed cable modem service, while traffic growth at its Internet portal service was modest, but above expectations.
"Cable subscriber growth continued to outpace expectations, and Excite accelerated its page growth, doubling what is generally a sequentially weak quarter," said Louis Kerner, an analyst for Goldman Sachs.
George Bell, Excite@Home president, said the fact that Excite@Home's total cable subscribers look like they will top 1 million by the end of the year is sign to advertisers.
"It signals advertisers that this is a real mass medium and it's not going away," Bell said in an interview with Dow Jones when results were released after the market closed.
On a pro forma basis, excluding merger expenses and other items, Excite@Home lost $4 million, or 1 cent a share, compared to a pro forma operating loss of $8 million, or 2 cents a share in the 1998 third quarter.
Revenues for the quarter were $113 million, an increase of 95% compared to pro forma revenues of $58 million in the year-ago third quarter. Revenue topped Wall Street expectations, which ranged from about $102 million to $108 million.
In after-market trading, Excite@Home stock was at 43 3/8, up from its close of 40 5/8 Tuesday, itself a 5.35% gain on the day.
Excite@Home Corp. based in Redwood City, Calif., was created when Internet portal Excite Inc. and broadband Internet access provider @Home Networks Inc. merged in May. Pro forma results include Excite Inc.'s results for all reported periods, even though the merger didn't take place until May.
During the third quarter, Excite@Home had 840,000 cable modem subscribers worldwide, an increase of 35% from 620,000 reported at the end of June and four times 210,000 of a year ago.
The @Home service entered 11 new markets, bringing the total available to 105 markets worldwide, the company said
Traffic on the Excite Internet portal rose to 89 million average daily page views during September, up 10% from 81 million page views per day in June, and up 78% from 50 million a year ago.
Analysts had expected traffic growth to be moderate because Excite@Home terminated an agreement with Netscape in the quarter. Netscape has been acquired by America Online Inc. (AOL). The 10% daily page view increase, they said, was higher than the approximately 5% page view increase the company saw in the 1999 second quarter.
The number of registered users for the Excite portal service increased to 44 million in the third quarter, up 16% from the 38 million in the second quarter.
In addition to signing up additional individual subscribers in the third quarter, Excite@Home was also able to sign contracts with four additional cable companies during the quarter, increasing its total to 23 cable companies with subscribers totaling 72 million homes, said Arthur Newman, an analyst with Schroder Securities.
"Their base of available homes is growing considerably," Newman said. "That is a very meaningful value creation.
Newman said that while the company has contractual access to 72 million homes, it can't start marketing to all of them until the home wiring is upgraded. But he added that the company is upgrading homes at a rapid pace.
Newman said that the company's deal announced Tuesday with Office Depot Inc. (ODP) and Good Guys! (GGUY) to sell Excite@Home's service along with home installation kits will boost acceptance of the service.
"This could be the hot new kit for Christmas," Newman said.
Excite@Home President Bell said the two new retail agreements, coupled with others signed in earlier quarters, will make Excite@Home service and kits available inside 250 stores by Christmas. He said with stores participating in rebates, the cost of the modem and installation kits will be driven down over time.
"By Christmas, it will be a significant part of our business and eases the installation bottleneck right now," Bell said.
Bell said hitting the one million subscriber mark for cable modems is also a sign to Wall Street that Excite@Home is shifting market share from other Internet Service providers.
"The significance of the size we reported today is that we are able to steal market share from other ISPs, like AOL, by giving customers what is a superior service operation."
David Levy, an analyst for Hambrecht & Quist, said the fact that the company was able to see some modest growth in its Excite Internet portal in the quarter, despite ending the Netscape deal, was encouraging.
"We expect growth to resume and become even more encouraging," Levy said.
Bell said the company intends to spend more money on marketing its Excite portal services in the fourth quarter to stimulate more page views.
Bell said the announcement Tuesday that Miami officials turned down a proposed law that would have required Excite@Home to open its service to other Internet service providers was good news.
"We all expect that local skirmishes will continue to get played out," Bell said, adding that his company supports the FCC's position that there should be one governing body regulating cable access and that it should be a federal one.
Bell said that the integration of Excite and @Home has gone well and that the company might be looking for acquisitions of its own in the near future.
"Now we feel confident we have people and systems working together, so if the opportunity was right, we could look at something else," Bell said.
-By Paula L. Stepankowsky, Dow Jones Newswires, 360-636 |
