[email protected] Will Survive

Despite its troubles, [email protected] will survive. The question is in what form.

That doesn’t mean you should rush out and buy the stock at 52 cents a share. Bankruptcy court may be the best place for someone to purchase the company’s assets. Why pay $200 million or more for the assets, when you could get them for much less if you wait a while?

There has been some speculation that someone would buy the assets of AtHome, the cable Internet service provider, in bankruptcy court, but let the Excite portal fail. I disagree. Has Internet traffic become such a bad thing that someone wouldn’t pay something for Excite’s millions of unique users? The pendulum has swung too far the other way if it’s come to that. Heck, someone bought the multi-billion-dollar satellite network Iridium for $25 million in bankruptcy court. There’ll be a buyer for Excite if it the price is right.

There is also talk of potential investors stepping forward before then, among them former White House Chief of Staff Mack McLarty. And there’s speculation that AT&T , which holds a controlling voting interest in ATHM, could step in at some point too.

But make no mistake about it, [email protected] is troubled. Its departing auditors, Ernst & Young, filed a report last week questioning the company’s ability to continue as a going concern. The stock faces delisting from the Nasdaq, which would give note holders leverage to demand $100 million in repayments, essentially forcing the company into bankruptcy. Some of those note holders are already seeking $50 million in repayment. The company’s debt has been downgraded to a few notches above default, and major cable companies are reevaluating their relationship with the company.

It’s admittedly a very grim picture, and it could well become by far the biggest Internet failure to date. But here’s betting that someone, at some point, finds [email protected] worth saving. In what form, only time will tell.

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