RealTime IT News

Excite@Home: Getting Out of the Dog House

I have been using Excite@Home's cable modem service for a year and a half. While it is not perfect, the speed performance is far superior to my old dial-up account.

As more and more people use the Web, they will want speed, too. What's more, the leading-edge Net technologies -- video, voice, etc. -- requires lots of firepower. Obviously, the future is broadband.

In this environment, it would seem that Excite@Home (ATHM) would be a perfect investment. It is a first-mover, which has locked-up cable agreements that cover 72 million homes. Of course, there is the Excite.com portal, the MatchLogic division (which provides advanced marketing technologies) and @Work (Internet services for businesses).

Yet, the stock has been a dog. Yesterday, the stock closed at $34-3/16. The 52-week low is $33.

Perhaps, a big problem is that the company is a hodge-podge of assets. Thus, it can make it difficult for Wall Street to value. What's more, the legal ownership rules regarding the cable agreements are mind-boggling.

But looking at the company, there are many bright spots. In the last quarter, the company made its first profit (true, it was small: $514,000). Revenues were $128.8 million, which was up from $73.3 million in the year-ago period. In all, the company has over 1 million subscribers. Keep in mind that the No. 2 cable modem service, Road Runner, has 550,000 subscribers.

To help clarify the valuation of the company, Excite@Home plans to create a tracking stock that separates the company into content and broadband. Actually, yesterday Excite@Home announced a new joint venture with Dow Jones to create work.com, which is a portal for businesses (focusing on the lucrative, but hard-to-target small and medium sized business market). The venture will combine the assets of @Work and dowjones.com. Sometime this year, work.com is expected to go public.

Excite@Home is a complex company and it will probably take some time for it to convince investors. But once the company is finished launching its tracking stocks and spin-offs, the picture will become clearer -- getting the stock out of its rut.