Nothing Exciting About Excite@Home's Earnings

Jul 23 2001

Excite@Home, the broadband company that provides cable modem service to the largest U.S. cable companies, reported softening revenues for the second quarter of 2001. The company, which has been struggling to keep itself sufficiently funded, lost $65.1 million for the quarter.

Revenues for the second quarter totaled $138.6 million, a 7 percent decline from the second quarter of 2000. The company said media and advertising revenues continued the precipitous decline that has been seen across the industry for several quarters, though revenues from new subscribers helped make up some of that slack. Net loss for the quarter was $346.3 million – which includes the company's exposure to investments, securities and so forth – compared with a loss of $668.3 million in the second quarter of 2000.

In the company's conference call with analysts and investors, CEO Patti Hart warned that the company needs additional funding by the end of the year. She also said continuing losses in the company's media business almost necessitate a sale of the company's media assets, which @Home acquired when it purchased Excite for $7 billion in 1999. At the time, it was the biggest and most spectacular merger ever attempted by two Internet companies.

The bright spot is that the company's core business, broadband Internet access, continues to grow. Excite@Home said its broadband base grew by 474,000, an increase of 62 percent over the 292,000 it added in the second quarter of 2000. The company now says it had more than 3.67 million subscribers as of the end of June.

But the company is currently renegotiating its contracts with both Cox and Comcast, two of the largest cable companies in the nation. The new contracts will certainly be less favorable to Excite@Home, which will put the broadband operations under significantly more pressure in the near future.

But the ongoing drama for Hart and company will be the company's cash crunch, which needs to be remedied soon. The company's cash and marketable securities totaled $183.4 million at the end of the quarter, compared with $104.5 million as of March 31. Most of that is what remains from the $185 million the company secured in convertible notes and through the restructuring of its optical-fiber-backbone agreement with AT&T, announced during the previous quarter.