[email protected]: Getting Out of the Dog House

I have been using [email protected]’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
[email protected] (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, [email protected] plans to create a
tracking stock that separates the company into content and broadband.
Actually, yesterday [email protected] 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.

[email protected] 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.

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