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Monday, November 22, 1999

"This report, by its very length, defends itself against the risk of being read."
-- Winston Churchill

Excite@Home Creating Tracking Stock

By Richard McCaffery (TMF Gibson)

High-speed Internet access provider and Web portal Excite@Home (Nasdaq: ATHM) plans to issue a tracking stock for its media assets, a move intended to eliminate confusion and help the company move faster in the hectic Internet world.

The common stock, which will be distributed to all shareholders on a tax-free basis, will track the economic performance of the media business. A separate board is being formed, composed of a majority of independent directors and a minority of the company's cable and telecommunications owners, which includes firms like AT&T (NYSE: T), Cox Communications (NYSE: COX), and Comcast (Nasdaq: CMCSK).

The plan, expected to be completed in the third quarter of next year, will separate Excite, the Web portal portion of the business, from @Home, the subscription service that offers high-speed Internet access via cable lines to about 1 million homes.

The two companies merged last January in a stock deal valued at about $6.7 billion. The move teamed a content provider with a company that offered a fast connection platform, which seemed to be an ideal vertical partnership.

But political problems developed surrounding access to cable lines for Internet service providers. By virtue of its ownership, Excite@Home has exclusive access to many of the country's cable lines. ISPs such as America Online (NYSE: AOL) are looking to gain access to these lines to provide a competitive service. This battle is being played out in courts throughout the United States. Creating a tracking stock doesn't solve the problem -- it wasn't intended to -- but it should help provide some distance between the content and highly charged access sides of the business.

Excite@Home's stock has tumbled since spring, from a high of $99 to $51 5/16 as of Friday's close.

News to Go

Networking equipment manufacturer Cabletron Systems (NYSE: CS) has agreed to sell its FlowPoint subsidiary for about $861 million in stock to Efficient Networks (Nasdaq: EFNT), and form an alliance with the company to fully penetrate the digital subscriber line business. Under the deal, Cabletron will become Efficient's largest shareholder.

Local telephone operating company SBC Communications (NYSE: SBC) and Internet service provider Prodigy (Nasdaq: PRGY) have reached agreement to pool their consumer and small business operations. Under the deal, Prodigy will manage ISP operations for SBC's current dial-up customer base of 650,000, and SBC will take a 43% ownership stake in Prodigy.

High-end computer and server manufacturer Silicon Graphics (NYSE: SGI) is reportedly in talks to sell its Cray Research division to a technology group called Gores Technology, Reuters reported.

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