Posted on: Tuesday, August 21, 2001

Debt, weak sales may doom Excite

USA Today

Excite At Home's accounting firm said yesterday that the nation's No. 1 broadband Internet provider is in jeopardy.

With mounting debt and weak ad sales for its Web directory service, there's "substantial doubt" Excite At Home can survive, Ernst & Young said in a Securities and Exchange Commission filing.

The problems could affect cable companies, including AT&T, Comcast and Cox, that offer Excite At Home to some 3.7 million high-speed Internet subscribers.

Analysts blame the company's ill-fated moves into the online media business. For example, it paid nearly $1 billion for e-greeting card site Blue Mountain Arts.

Excite At Home's problems could create trouble for several groups:

• Investors. Shares fell 40 cents, or 46 percent, yesterday to 47 cents. The stock traded as high at $94.66 on April 12, 1999.

Now Excite At Home is flirting with being delisted, because it can't maintain the Nasdaq's minimum requirements. If that happens, the company's cash crunch gets worse, because it'll be forced to pay back a $100 million loan earlier than planned.

• Customers. The service's users face "potential of disruption" says William Blair & Co.'s Abhishek Gami.

It's unlikely cable companies would let millions of customers' connections go dark. It's unclear, though, who will want to deal with the mess, says Ian Olgeirson, analyst at Kagan World Media.

• Cable companies. Comcast, Cox and AT&T customers may be angry if service is disrupted, giving phone company rivals a chance to steal market share, says Yankee Group's Michael Goodman.

• Lenders. Excite At Home has amassed roughly $900 million in debt. Lenders will be lucky to get just pennies back for every dollar they lent, says Drake Johnstone of Davenport.

• AT&T. The No. 1 cable operator owns 23 percent of Excite At Home and is hunting for alternatives to Comcast's $39-billion stock offer for AT&T Broadband.