[Note: The participants on the Excite@Home discussion board chose today's column as their official rebuttal to the Rule Breaker's roundtable discussion of the company. Check out the excellent responses written by NicholasJG and rlorenzo. Dripster also wrote up a complete summary of the chat and the board's responses to it.]
If you want to get in on a heated debate this fall, you don't have to talk politics or football -- you can find all the controversy you need right @Home. The informal chat format that The Motley Fool experimented with, titled Excite@Home as Problem Child, has caused a whirlwind of responses. The only thing almost everybody agrees on is that the future of Excite@Home (Nasdaq: ATHM) will be, well, Exciting to watch.
The company's stock price has had a wild ride the past couple of years. From the Rule Breaker's buy on 12/4/98 at a split-adjusted $28.04 a share, Excite@Home shot up to nearly $100 only four months later. From that point, however, it has declined to its current price below $20 a share.
Why am I discussing stock price? Simple. This company is in such an early stage of development, and has undergone such tremendous changes over the past two years, that Wall Street simply doesn't know how to value it. Even the Breaker Portfolio managers considered selling Excite@Home, in between bites of deli sandwiches washed down with Mr. Pibbs.
I think the reasons why Excite@Home has been beaten down are obvious. There has been a lack of clear direction, caused by a confusing ownership structure (the majority owners are cable companies, who also happen to be Excite@Home's partners and customers). The Excite portal, once a well-branded Internet juggernaut, has been relatively meek in its performance over the past year.
Exclusive contracts granted to Excite@Home to provide Internet access to more than 20 cable companies' subscribers were in jeopardy when the City of Portland tried to force AT&T (NYSE: T), which has voting control over Excite@Home, to open the cable lines to @Home's competitors. Management has not effectively sold the story of Excite@Home to major investors. Yes, there are a lot of reasons the stock price is low right now.
Given all that, why would anyone be bullish on the future of this company? Here's why...
- Excite@Home is positioned in the middle of the coming broadband revolution. Even bears on the company willingly acknowledge that "the need for speed" is pent up in the market. @Home is the leader in broadband subs, having passed 2 million subscribers this summer.
- Only 2 million subscribers? Yes, but by the end of 2002, George Bell (Excite@Home's CEO) is expecting 10 million subscribers! The biggest bottleneck to subscriber growth has not been demand, but rather a complicated installation procedure that requires a truck to roll to each household that subscribes. Self-install kits, which will speed the installation process dramatically, are expected very soon.
- If you think @Home is too domestic, think again. With partnerships in many countries, the company pulled its overseas strategy together with a 50% partnership with chello, named Excite Chello. This is the largest broadband access company outside the U.S. While the number of subscribers is fairly low right now, the pay-by-the-minute phone services in many countries (even for local calls) makes getting on the Internet prohibitively expensive for most people. Thus, broadband access over cable should reach penetration levels overseas much higher than what is expected in the U.S. market.
- @Home has a mechanism to deliver better service to its customers, while saving traffic on the fiber-optic backbone the company is leasing from AT&T. Popular content is distributed to caching servers throughout the country. This will allow @Home subscribers to enjoy speedy service to the most popular sites, even if "the Internet" is bogged down by traffic.
- OK, but all you've been discussing is @Home -- what about Excite and its lackluster performance? Excite has been gearing up for broadband growth by creating a broadband-targeted portal. While the acquisitions (such as bluemountain.com, webshots.com, and the recently acquired gaming site pogo.com) have not yet been producing spectacularly for the company, the focus on broadband content will hopefully become evident well before @Home has its 10-millionth subscriber.
- In addition, two early acquisitions should prove to be winners. Matchlogic is a technology that finds out what you're interested in and targets ads that you would like to see, then Enliven makes those ads interactive (allowing you to play games or even order merchandise directly from the ad without leaving the site you were on).
-- Scott Keller, TMFNole on the discussion boards.