Troubled Excite@home loses two partners

By Matthew Fordahl AP Technology Writer
Saturday September 01, 2001

SAN JOSE — In another blow to financially troubled Excite@ Home, two major cable companies said Friday they will terminate their partnerships with the high-speed Internet provider. 

Meanwhile, negotiations continued between Excite@Home and an investment firm that arranged emergency funding for the company last spring and had demanded a $50 million payment by Friday, according to a source close to the talks. 

Comcast Corp. and Cox Communications Inc. said they will exercise the right to exit from their agreements effective June 4, 2002. 

The end of the deals does not mean the companies’ cable modem customers will lose access. Rather, Comcast and Cox are likely to take over some operations themselves and find new partners for others. 

“We want this to be a Cox-managed network,” said Cox spokeswoman Laura Oberhelman. “We will have a greater amount of control over our network and assuming a lot of the responsibilities that sit with Excite@Home.” 

Steve Burke, president of Comcast Cable, said exercising the exit provision was in the best interest of customers and shareholders in light of reports of Excite@ Home’s financial condition. 

Both Comcast and Cox also are in discussions with Excite@ Home about forming new, more limited agreements. 

“That being said, we will have 950,000 customers by year end and we need to ensure that they continue to be well served,” Burke said. 

But it remains to be seen whether Redwood City-based Excite@Home will survive into next year. The once high-flying company said in August that its independent auditors expressed doubt about its viability. 

The latest crisis was the result of $100 million in convertible notes sold by Excite@Home in June to stave off another cash crunch. Promethean Investment Group LLC, which bought half the notes, later said Excite@ Home misrepresented its financial condition and how long the money would last. On Monday, Promethean demanded a $50 million payment by Friday. 

“We don’t think there’s merit in this call for the loan,” said Stephanie Xavier, an Excite@ Home spokeswoman. “We’re not paying the money today, and we’re in active discussions with them about the call.” 

Still, the $50 million is just a fraction of the $1 billion debt load carried by the company. 

AT&T Corp., which is both a cable partner and controlling shareholder, has not made its intentions known. AT&T did not immediately return a call seeking comment. Some analysts believe AT&T or another investor may make a last-minute bailout. 

Excite@Home announced Friday that it will hire an investment banking firm as a financial and restructuring adviser. The firm will assist the company in “exploring its options related to its financial position,” according to a statement. 

AT&T, Comcast and Cox are the three largest of the 21 cable systems that use the service. Excite@Home currently has 3.7 million subscribers nationwide, Xavier said. 

The company, which also operates the Excite Web portal, has been hard hit by the downturn in Internet advertising and questionable management decisions. 

Excite@Home provides e-mail, some content and the network backbone for cable modem users. 

In addition to the $100 million in notes, ExciteAtHome raised another $85 million in June by restructuring the lease of its fiber-optic network from AT&T Corp. Even so, the company said in July that it needed more cash to stay in business in 2002. 

The company’s stock was down 19 percent, or 10 cents, to close at 42 cents a share Friday on the Nasdaq Stock Market.  

It was trading at more than $100 at the time of the Excite merger. 


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