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@Home: At the End of Its Rope?

Excite@Home Corp.'s situation appears to have gone from bad to worse as investors reacted to the company's 10-K filing with the Securities and Exchange Commission (SEC) Monday -- a filing which admitted that the company has "substantial doubt" as to its ability to continue as a going concern.

"Our stockholders have approved a reverse stock split which would, if our board of directors elects to implement it, increase the trading price of our Series A common stock above $3, but we cannot assure you that this would result in a sustained increase above the minimum bid price requirements," told the SEC. "Therefore, our existing cash and other liquid assets may not be sufficient to fund operations through the end of 2001. These conditions raise substantial doubt about our ability to continue as a going concern."

Questions about the its ability to sustain the stock price above $3 seemed to take on the aspect of a self-fulfilling prophecy Monday, as investors sold the stock furiously. It plunged 43.68 percent from an open of 81 cents to a late afternoon price of 49 cents.

Standard & Poor's also reacted to the filing, downgrading @Home's credit rating from B-minus to CCC, and its subordinated debt rating from CC to CCC.

The plunging stock price raises the possibility of a takeover of the company, especially with majority stakeholder AT&T Corp. trolling for buyers for its AT&T Broadband business, which includes the @Home holdings. According to InternetNews.com sister site ISP-Planet, cable ISPs place a value of $450 on each subscriber, and @Home leads the pack with 3.3 million. That puts the value of @Home's subscribers at about $1.4 billion.

@Home attributed most of its problems to the media side of its operations, which has been hit heavily by the severe downturn in the Internet advertising market. The company reported a $346 million loss in July. Since April, the company has been attempting to streamline its media businesses, but has had little success in finding buyers.

Indeed, before reporting July's loss, the company had indicated that it did not have enough cash to see it through the year. That announcement was followed by a $100 million bond sale and the restructuring of its backbone agreement with AT&T, which put another $85 million in its coffers. But despite the influx of $185 million, the company said in July that it still did not have enough money to make it through the year.

Cost-cutting measures have included lay-offs. The company cut 250 employees in January, 380 in April, and said Friday that it would lay off another 200. Monday's 10-K filing indicated that it will lay off another 90 or so employees from its MatchLogic subsidiary.