@Home: At the End of Its Rope?

[email protected] 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

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

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.

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