ExciteHome drowned in its own overheated juices
Associated Press
Published Oct 8 2001
@Perhaps more than any other Silicon Valley story, the rise
and fall of Excite@Home illustrates the land-grab mentality
and misguided efforts of the tech boom.
It was like many other companies at the height of Internet
euphoria, with an expansive cafeteria, an imposing
headquarters, even a slide where employees could zoom down to
the ground floor.
The company spared no expense to attract more "eyeballs" to
its Web pages, dropping a mind-boggling $780 million for a
greeting-card site that it ultimately sold off for $35 million.
But unlike almost all the dot-coms that flunked out,
Excite@Home owned something real: a network that provides
fast Internet access over cable TV connections.
In fact, many analysts believed at the time that the $6.7 billion
deal in 1999 that merged Excite Incorporated's popular Web
site with At Home Corp.'s cable-modem business created a
powerhouse that could challenge America Online. Two and a
half years later, Excite@Home was the nation's leading
provider of fast Internet access.
But on Sept. 28, the company filed for bankruptcy and said it
will sell its broadband business to AT&T Corp. for $307 million
in cash. AT&T said it has no plans to acquire
Excite@Home's portal business.
Excite@Home's stock price crumbled from more than $100 to
less than 20 cents, and it lost $7.28 billion in the past four
quarters. Needing more funding to operate into 2002, the
company has sold off properties and chopped its work force,
including a 27 percent cut announced Tuesday.
The chief financial officer quit early last month.
Growth 'at all costs'
How could the company fall so far so fast? Former executives
said that long before the tech downturn, the company struggled
to find its focus and was riddled with problems caused by
questionable management decisions, perhaps even the merger
itself.
"Excite@Home might have been trying too many things at
once, at too high a velocity -- they were really growing for
growth's sake, grow at all costs, without much regard for
expenses," said John Corcoran, Internet analyst at CIBC World
Markets. "This is a textbook example -- everything that could
go wrong did go wrong at the company."
An Excite@Home spokeswoman declined to comment on the
company's past problems and said the current CEO, Patti Hart,
was unavailable.
Big ambitions drove the company's founders.
Six Stanford University graduates borrowed $15,000 from their
parents in 1993 and launched Excite Inc. in hopes of creating a
way to manage the information on the Internet.
At Home Corp. was founded in 1995 by cable industry veterans,
high-profile venture capitalists and NASA networking
engineer Milo Medin.
Excite quickly became one of the Internet's most popular search
engine/portals. Yahoo and Microsoft considered acquiring the
company, but Excite executives chose a bolder move, combining
their content with someone else's distribution. They chose the
company based across the street in Redwood City -- At Home.
At the time, At Home had just 331,000 cable subscribers. But it
was poised to satisfy what figured to be a rapacious demand for
faster Internet access among people tiring of slow dial-up
connections.
Although Excite lost $7.4 million on just $54 million in revenue
in its last full quarter as a separate company, At Home's
executives liked the demographics of Excite's 20 million
registered users, as well as the company's expertise in online
marketing.
Strong cable base
At Home credits Excite's popularity with helping the cable
business grow well, and it now counts more than 3.7 million
subscribers who pay $35 to $55 a month.
Excite@Home had exclusive deals to provide Internet access for
huge cable TV companies such as Comcast and Cox
Communications, both early investors in At Home, along with
Tele-Communications Inc. AT&T became the controlling
shareholder in At Home when it acquired TCI.
But that didn't necessarily make life easy.
By November 1999, AT&T and other cable system owners were
openly criticizing Excite
@Home for maintenance and customer service problems.
AT&T once had to mollify customers upset with outages by
offering them five months of free service.
In June, Cox and Comcast decided to stop offering Internet
access exclusively through Excite@Home. Then in August, the
companies said they would stop using Excite@Home altogether
next year.
Andrew Johnson, a spokesman for AT&T Broadband, the
largest cable company that still has an exclusive access deal,
denied that Excite@Home was arrogant or lax. He said
"growing pains" were understandable given its quick rollouts of
new technology.
But AT&T has not been entirely supportive. Shortly after the
Excite acquisition, AT&T Broadband's president, Leo Hindery
-- then an Excite@Home board member -- said At Home
never should have linked its access business to a single content
provider.
Former executives said Hindery's comments were troublesome.
One said it devastated morale. There were complaints that
AT&T sabotaged Excite
@Home's potential by signing deals with some of its
competitors.
Management turned over extensively. The At Home CEO who
first led the combined company, Thomas Jermoluk, left a year
after the Excite acquisition. His successor, former Excite chief
George Bell, announced his intent to quit eight months later.
Hart wasn't hired until April 2001.
Analysts also say management fell for its own hype -- like the
braggadocio it used when it claimed tens of millions of cable
homes in its worldwide "footprint" -- a measurement not of its
business success but merely its potential customers.
As it turned out, broadband hasn't grown as fast as many in the
industry hoped, and rolling out Excite@Home's network has
been more costly than anticipated.
All these issues weakened the company before the punishing
downturn in technology stocks and online advertising that
began early in 2000.
While competitors such as Yahoo and AOL also have suffered,
Excite@Home was hit harder because the popularity of
Excite.com had waned. Three years ago, the portal was being
visited by one-fourth of all Web surfers. According to Jupiter
Media Metrix, its reach was 15.4 percent in August.
In the surest sign that few synergies developed between the two
sides, Excite@Home considered the portal a drain on its
cable-modem business and tried in vain for months to find a
buyer.
© Copyright 2001 Star Tribune. All rights reserved. |
