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Excite@Home: Only One Way to Go from Top

For a few months, anyway, it looked like Excite@Home (ATHM) would have two ticker symbols. Now the company may end up with none, perhaps as soon as next year.

Concerned about Excite@Home's weak support by investors and the threat to its cable access market leadership position from the pending AOL and Time Warner merger, majority shareholder AT&T on Wednesday detailed steps to strengthen its grip on ATHM.

First, AT&T killed plans announced last November for a separate tracking stock for Excite@Home's media assets. The proposed move, which I wrote at the time seemed like a good one, was intended to clear up investor confusion about Excite@Home's strategic direction.

AT&T, which currently owns a 56 percent voting share of ATHM, also announced it would consolidate Excite@Home's financial performance with its own.

But the telecommunications giant also extended distribution agreements with Comcast and Cox Communications under which two cable companies allow Excite@Home to use their lines. The new deals extend beyond June 2002 -- when the original pacts were slated to expire -- to 2006, though they are not exclusive.

However, AT&T also offered its two minority partners, Comcast and Cox, each own about 8 percent of ATHM voting shares -- the option of selling their stakes in Excite@Home beginning next year.

Don't be surprised if Comcast and Cox jump at the offer. For starters, they would be able to sell their ATHM shares to AT&T for at least $48 per share between next Jan. 1 and June 4, 2002, when the exclusive distribution agreements end.

Given ATHM's recent lackluster stock performance (shares had fallen below $30 in recent weeks, well below the all-time high closing price of $91 set last April 13 ), AT&T appears to be offering a pretty good deal. Certainly investors think so; ATHM shares were up more than 6 percent Wednesday afternoon, even as the vast majority of 'Net stocks were down.

Further, selling their stakes in ATHM would free Cox and Comcast from a partnership in which what little control they've had has dwindled further. Besides being minority shareholders, the two companies will no longer have representatives on the board of directors after AT&T asserted its right to elect a majority of board members.

Finally, it gives the two companies the freedom to strike deals with other cable access players (read: AOL). Granted, ATHM is No. 1 right now and AOL-Time Warner must play catch-up, but if you're looking down the road, it's hard to bet against the Internet's most popular service and the world's largest media company.


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