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Excite@Home: @ the 2 Million Mark

Two-thirds of the way to its year-end subscriber target, Excite@Home cited momentum in the high-speed access market and the cooperation of its cable partners as instrumental in crossing the 2 million milestone. But while the Rule Breaker's combination of media and connectivity is a hit with consumers, getting it to click with investors once again is another story.

By Nico Detourn (TMF Nico)
August 23, 2000

Excite@Home (Nasdaq: ATHM), the largest provider of high-speed cable Internet services, announced this morning that it had passed the 2 million subscriber mark, adding about 200,000 new customers to the 1.8 million reported at the end of the June quarter. Trading in the company's stock, which closed yesterday at $14.06, was not substantially influenced by the news.

Behind the headline number, Excite@Home found strong growth momentum in the market for high-speed, or broadband, Internet access and its emergence as a mainstream consumer service. The company also noted that while the @Home service took almost four years to sign up its first million subscribers, reported in early December, it took about eight months for that number to double. The service closed out 1999 with 1.15 million customers.

Excite@Home's 2 million subscribers place it well ahead of its main rival, Road Runner -- a joint venture of Time Warner (NYSE: TWX) and AT&T (NYSE: T) -- which says it provides broadband Internet access to over 912,000 cable subscribers. Nevertheless, mounting consumer interest in fast Internet connections, as well as stepped-up competition from providers of high-speed services over phone lines (DSL) and wireless devices, places an across-the-board premium on rapid subscriber growth.

Focus on growth and international expansion
In April, Excite@Home announced it would defer near-term profitability as part of a renewed focus on stimulating subscriber growth and expanding its international operations. It also announced a goal of 3 million subscribers by the end of this year, shooting for 6 million and 10 million subscribers for the end of the following two years, respectively.

During the June quarter, the @Home service added about 300,000 subscribers, on the low end of expectations. The shortfall was blamed on a temporary interruption in the flow of cable modems to the company's cable partners, who handle new subscriber installations. That modem shortage has since been alleviated.

Today's announcement addressed concerns about Excite@Home's relationships with its cable partners, and its dependence on partner cooperation and performance in meeting subscriber goals. "Our cable partners have been instrumental in helping us to achieve this milestone through their efforts at system upgrades and customer installations," the company said.

The company also reiterated today its year-end goal of having 3 million subscribers, which, like the 2 million announced today, will exclude subs added through its recently announced joint venture with Netherlands-based high-speed ISP chello broadband. Those numbers do include subscribers from other international operations, though.

Self-install modems, which let customers avoid in-house visits from their local cable company, are expected to help Excite@Home add the million new subscribers needed to meet the year-end goal. The company also recently launched a subscriber acquisition program. On a subscriber basis, the @Home service ranks as the eighth-largest North American access provider when measured against dial-up services, the company said today.

The narrow, the broad, and the total
The Excite Network, which includes the predominantly dial-up-driven Excite portal and the Bluemountain.com greeting card site, continues to rank among the Web's top five properties, according to Media Metrix. However, so-called unique visitors to the sites have recently been trending down. The number of pages viewed at the sites also declined 5% between this year's first and second quarters, pointing to an erosion of actual user activity.

Attempting to counter that to some extent, Excite@Home said today that "broadband page views" at the broadband version of the Excite portal have more than doubled since its March introduction. The company cited this as evidence that "the combination of media with connectivity has proven to be popular with consumers."

But that combination is not unique to Excite@Home, and especially not to the broadband platform. That the company chose to single broadband page views out is understandable; by itself it's an impressive statistic. But placing it put in context with declining usage statistics of the total Excite Network -- which accounts for over half of the company's total revenues -- underscores the challenges faced by the total company. And while Excite@Home's combination of media and connectivity is a hit with consumers, whether it will once again click with investors is a story yet to be written.

Your Turn:
Are growing pains now a thing of the past for this high-speed Rule Breaker? Will the company meet its ambitious year-end subscriber target? And what might it take to get the stock out of its slump? Fools at all speeds and on all devices are at all times welcome to share their thoughts on the Excite@Home discussion board.

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