I excerpted this out of the Fortune Magazine article of several weeks ago. I recently went through every post in this thread to get a sense of where the watchers are at. Wild opinions all over the board including my own. Meanwhile hardly a peep on the MSFT thread for months except discussions about broken windows. MSFT shares are preparing for a solid move to 170, but no one cares. In contrast there is all this freneticism here. The reason is that MSFT is passing into the final status as the IBM of the recent era. When there is great uncertainty in expectations, there is volatility. That's where I want to go long. That's a risk worth taking. As far as current weakness in the ATHM is concerned, I think this Fortune article captures the marginal attitudes of dumbell Wall Street. When stock activity (don't use the word, volume) is small, marginal attitudes are able to effect price.
Oct 28, 1997
Grand illusions?
By Julie Pitta
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And At Home's own business partners, a consortium of cable companies, have been holding back. If At Home is to be successful, cable operators will need to retail the company's superfast Internet service to their subscribers. As incentive, they pocket 65% of the between $35 and $55 in monthly subscription fees, while At Home gets the remaining 35%. Problem is that to get those fees they will have to spend through the nose on capital improvements, and burdened with debt as many of the cable outfits are, they are not dying to go out and borrow more.
..."Our balance sheet was too risky, our debt was too big and our third-quarter results were disappointing," says Bruce Ravenel, Tele-Communications, Inc.'s Internet chief, explaining why the company is cutting back on system enhancements. The Colorado-headquartered cable giant owns 39% of At Home. TCI dragged its feet for six months beyond the planned early-1996 starting date for At Home, and even now offers the service to, at most, 3% of its 14.2 million subscribers.
When TCI's capital budget does get flush again, upgrading to two-way is not likely to top the list of spending priorities. The company is more interested in digitizing its cable service, allowing it to double the number of channels. That way it will be better able to fend off the immediate threat it faces from direct broadcast satellite.
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TCI's Bruce Ravenel was an early booster of At Home. His enthusiasm has diminished. He is not ready to agree with George Gilder that the Internet will change couch potatoes into interactives. "It has yet to be proven," he says, "that people want to interact with their television sets. I don't think [the Internet] is going to be the mainstream of our industry."
What about two-way cable? Gosh, he says, "that's something that's been talked about in our industry for 30 years."
Venture capitalist Donald Valentine, who took big risks on Apple Computer and Cisco Systems, never considered At Home as a serious investment. "TCI is unwinding, divesting and shutting down initiatives started in the last five years," Valentine says. "All these cable companies have acted rather childishly, jumping from rock to rock in the hopes of survival. Are they going to stay on the At Home rock? I'd be surprised."
While the cable companies dither, competitors are pushing alternatives to At Home. The telephone companies are working on speeding traffic on existing telephone lines. In one experiment in Illinois, Web surfers are getting connected at 1 megabit per second over copper telephone lines. That is getting close to what At Home can deliver. The phone companies have one distinct advantage over the cable outfits: They have the cash to make improvements to their networks.
None of this has diminished the enthusiasm of L. John Doerr, the venture capitalist who conceived At Home and hired Jermoluk to run it. "This is going to be one of the five important Internet companies," says Doerr, who is fond of saying that the Internet is underhyped. His advice: "Don't pick on it."
And you thought Jobs was a clunk. How would you like to have this guy Ravenal running the most important component of TCI? TCI has nothing without ATHM. He says, "(unknown whether) people want to interact with their tv sets". That is completely irrelevent.They just don't get it. They are trying to look at cable modem as tv enhancement, which is similar to looking at telephone as a telegraph enhancement.We have an entire new paradigm here. Why do you think that MSFT made such a flip-flop on the internet?
The public is bored to death with tv. Ravenal no doubt can quote studies of people's attitudes toward the tube and where they'd like TCI to take it. Wrong. The people don't know where to take it. That's where TCI's innovation can come in to lead. Innovation is not doubling the number of channels, that just dilutes your ad revenues and doesn't challenge satellite's incursions.
Innovation equires leadership. You're not going to get that from the likes of him or Malone or most of the so-called risk taking execs in American industries. They'll let Gates take the risk, make a bundle if it works, and then whine to government when they aren't able to imitate(steal) the product. Then, he says,"'I don't think [the Internet] is going to be the mainstream of our industry.' What about two-way cable? Gosh, he says, 'that's something that's been talked about in our industry for 30 years.'" Can you believe that Malone pays this guy 500 G's/yr?
Just when you thought you'd seen it all, the next clown comes on front and center. This guy is a true risk seeker. He is part of the "smart money" clan that is always right. He says he doubts whether the cable companies will tough it out with @Home. Well buddy, TCI doesn't have a choice. They'll be dragged kicking and screaming to embrace this paradigm whether they want to or not. As usual with their Yankie entrepreneurialim the people will make them wealthy and as usual the spineless wimps will be heralded for their bold, courageous stand against all odds.
Fortune magazine is very influential among the big shot illiterati of the East Coast. So if you wonder why the stock slides, you don't got to go very far to know. I have it on good authority that the company officers are none too happy about TCI foot dragging. There have been some pretty good arguments. TCI doesn't think @Home can catch up with AOL! And I thought TCI was turning it around. They happily accumulated this debt position and now they're paying it down rather than invest in critical infrastructure. Solid, god-fearing hard money men. And smart too. |
