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To: Glenn D. Rudolph who wrote (14810)	10/15/1998 8:56:00 PM
From: Alan Newman	Read Replies (1) \| Respond to of 27307

Briefing.com's interpretation of Excite's earnings announcement: EXCITE (XCIT) 32 3/4 -1 7/8(Closing price) Excite continues to give lessons in why you have to carefully read earnings releases. At first glance, today's report looks terrific, with earnings posted as $0.02 a share. But that number is reported on a pro-forma basis. Pro-forma earnings are used when one quarter contains line items not present in the year-ago quarter, and is often used for post-merger reports. So what's the line item they want excluded? Marketing. If your reaction is "Huh?" it should be. Last quarter Excite attempted to bury, as a one-time charge, a huge cash payment to Netscape for co-marketing on the NetCenter site. Briefing blasted them immediately for this, as it runs counter to the basic accounting principle that an expense should be deducted over the time period of its benefits. In today's release Excite admits to its previous error, and even states that "after discussion with the staff at the SEC, the company will amortize $58.6 million of cash payments to Netscape." (Wonder who initiated the discussions?) However, Excite then goes on to report the amortized charge for this quarter as an excluded non-cash charge! Since when does marketing get treated like an extraordinary charge? And it was definitely cash; it just left the bank last quarter. Excite seems absolutely bent on posting an earnings report that shows a profit, no matter what it takes. The truth is that, when the amortized charge is properly accounted for, Excite lost $6.8 million. Excite does include this information in their release, but call it "on a GAAP basis." GAAP stands for Generally Accepted Accounting Principles and are the accepted method of reporting earnings. Make no mistake, Excite lost $0.14 a share. Zacks earnings expectations were a loss of $(0.02) a share, presumably not including the Netscape marketing charge. Estimates for next year were for $0.37 a share, but now, with a loss of $(0.15) a share coming every quarter for the next two years, estimates will be rewritten, and Excite is likely more than a year from a profit. While we certainly want Excite to succeed, (Briefing information is posted daily on the Excite/Intuit Finance Channel), we think the company could be more direct about their results. Revenues increased strongly to $44.5 million, and page views were up 15% on a sequential basis.