Dear Shareholders:
George Bell here, chairman and CEO of Excite@Home (Nasdaq: ATHM). Boy, have I got some great news for you! We've decided to merge with chello broadband, the cable Internet portal of United Pan-Europe Communications (Nasdaq: UPCOY)! We'll contribute all our non-North American assets to the deal, including 10 Excite portals and three broadband businesses serving 13.5 million homes. We'll own 43% of the new company, Excite Chello, which we'll split off in an initial public offering (IPO) in about six months.
We really mean it this time. It's not like that Excite spin-off thing we used to talk about. This is a whole new Excite@Home-style venture! We've even done our best to make the ownership of the new company every bit as complex as Excite@Home Classic.
We'll own 43% and UPC will own 43%. You know, of course, that UPC is 61% owned by UnitedGlobalCom (Nasdaq: UCOMA), which is now 45% owned by Liberty Media (NYSE: LMG.A), which is a tracking stock of AT&T (NYSE: T), which has 74% voting control over Excite@Home. Oh, and Liberty will also put up a couple hundred million for Excite Chello in exchange for some convertible notes in the company.
Hey, it could be worse: You could be a Liberty shareholder! Then you really wouldn't understand what's going on!
The whole operation will be headed up by Roger Lynch, a fine investment banker who used to do some odd jobs for us at Excite. It seemed appropriate that an investment banker head a global media company, since we've planned more mergers and corporate restructurings for the new company than Evel Knievel has scars!
The best part of this new arrangement is that it frees us up to concentrate on building out our domestic broadband network. I've got some news there, too, if you want to hear it.
You know how we've been talking about getting to 3 million broadband subscribers by the end of the year? Well, we're still all about that -- you know we are -- but, we hit a little snag. We signed up 300,000 new customers last quarter, which is about 75,000 fewer than we thought we would. No biggie, really. Subscriber rolls were up 21% sequentially, which is a little down from the 30% we had last quarter and the 36% the quarter before, but it's not bad.
Hey, it could be worse. You could be a Time Warner (NYSE: TWX) shareholder! Those jokers only increased their cable Internet subscribers 7.7% sequentially! They've only got 570,000 customers, compared to our 1.8 million, yet we outpace them in subscriber growth!
Anyway, we would have done better, but there was this fire, see, at a cable modem factory. Without that, we would have hit our target. I know, I know... we could have said something sooner. We knew about it, and we didn't tell you. That was rude and wrong of us. Do you think it was better or worse than our not telling you last quarter that we changed our minds at the last minute about being profitable?
Well, it doesn't really matter. It's apples-to-oranges. Water under the bridge, anyway.
We're still on track for 3 million this year, though. We'll get 400,000 new subs in the third quarter -- that's only 22% sequential growth, well within our abilities -- and finish off with 800,000 in Q4. I know, you're thinking, "That sure seems like a lot!" It's only 36% sequential growth. We did that last Q4, on a base of 850,000. How hard could it be to do that again?
We've got this great idea, though, to expand rolls fast: self-installation! We'll have cable modem installation kits at your local electronics store by the holidays! Now all those people who haven't been signing up because they didn't want a stranger traipsing mud all over the house will do it themselves. Those reluctant, non-first-adopters love busting open their boxes, shoving components in, and reconfiguring their software! If they can mess with their cable jacks, all the better!
Hey, it could be worse. You could be an America Online (NYSE: AOL) shareholder! They thought that making things easy was the way to win subscribers, and look what happened to them!
One final piece of good news. Some of you looked at our balance sheet and turned a little white when you saw our cash balance. Well, we won't be burning cash in the future at the rate we did this quarter. It was the buildout, you know. Won't be doing any more of that. And, if we change our minds, we've got big brother AT&T. They'll do anything for us. If there's one thing Mike Armstrong and John Malone care about, it's you, Excite@Home shareholders!
And you can take that to the bank.
Yours truly,
George Bell
Chairman and CEO, Excite@Home
Ghostwritten by Brian Lund, published separately under the pseudonym TMF Tardior.
P.S. Amgen (NYSE: AMGN) rose to a new high alongside a favorable patent lawsuit ruling.
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