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Will Excite@Home's spin-off strategy work?

As it attempts to derive more value from its assets, the company is banking that separately valued ventures will serve it well, even as competitors such as America Online consolidate.

    Excite@Home's Web is becoming even more tangled.

    As it attempts to derive more value from its assets, the company is banking that loosely linked entities and separately valued ventures will serve it well, even as competitors such as America Online consolidate.

    Having recently announced plans to value its Web assets separately using a tracking stock, Excite@Home this week broadened its scope by revealing a deal with Dow Jones to develop a business-focused Web portal, called Work.com. The companies plan to sell a chunk of it to the public.

    The joint venture could be seen see story: Mergers: How big is big enough?as Excite@Home's bold first step into the emerging market for business-focused Web destinations. But it also might be interpreted as the persistence of a confusing strategy aimed at justifying the often-criticized merger between broadband provider @Home Network and Web portal Excite.

    The spin-off would become the third ticker symbol spawned by the five-year-old Internet company. Excite@Home also plans to introduce a tracking stock in August to separately value its media and content business--the assets that used to fall under Excite's umbrella.

    Executives at Redwood City, Calif.-based Excite@Home maintain that their timing could not be better; they say their plans are a way for them to appropriately value an emerging jewel in the company's crown.

    "(Work.com) should be a home run, not just one more base hit in our day-to-day activities," said Mark Stevens, Excite@Home's senior vice president of business development.

    The spin-off could provide greater focus for both the residential consumer and business halves of the company. Excite@Home currently caters largely to residential consumers via its high-speed Net access and Web portal properties; Work.com will operate separately and serve business customers, keeping the audiences distinct.

    However, the spin-off also could isolate one of the highest-growth units of Excite@Home just as the business portal market is expected to take off.

    More broadly, the company's plans indicate that executives are assuming the stock market's bull run will continue to support new Net stocks, whether they are initial public offerings by start-ups or spin-offs from established companies.

    Excite@Home executives said they would rather have a large equity ownership position in a strong spin-off than have to internally develop a lesser-known business portal simply to keep the resulting revenue. Equity ownership by Dow Jones was a prerequisite for the partnership, they said.

    "When you have an equity position you treat it much differently than a commercial relationship," Stevens said. "It's important that we get more than (news) stories from Dow Jones. We need their full corporate commitment. That you can't get from an arm's-length contract.

    "This is a new form of partnership. Without equity rewards, powerful, large companies are reluctant to give away their business," he added.

    The combination of Excite's portal prowess and the top-notch news and information created by Dow Jones are a natural fit, according to analysts. Giving both companies an equity stake only creates a greater incentive to make Work.com a success, they said, and the lack of a leader in the business portal market means the time to act is now.

    "Nobody's a clear leader right now. That's an opportunity for someone with the clout of Excite@Home and the respected name of Dow Jones," said Michele Pelino, program manager for Internet market strategies at The Yankee Group.

    But others believe there could be a downside to Work.com's independence. The danger is in leaving the business portal on its own just when titans like Yahoo and AOL are gearing up for their own initiatives.

    "I guess the major threat of spinning off properties is that you lose sight of them," said David Card, an Internet analyst at Jupiter Communications.

    Although the market looks promising now, the success of business portal ventures such as Work.com--and that of its expected IPO--are not guaranteed.

    Business portals as a genre are an unproven commodity on the Net, analysts say, although several firms are casting their eyes at the booming small-business market.

    Sites such as Yahoo Small Business and Microsoft's MSN bCentral are targeted toward helping users build online businesses. These sites provide services such as Web site publishing, online promotion and e-commerce capabilities. The idea is to give small businesses a home on the Web to build user loyalty and dependency while using properties owned by the likes of Yahoo and Microsoft.

    AOL also has taken steps to turn Netscape's Netcenter into a business portal. The online giant has mulled ways to tie together the browser and Web portal components of the firm--as well as Net access--as a separate product for businesses.

    Because the majority of AOL's users log in at night, the Netcenter portal could attract more daytime users to its services. Late last year, Netcenter underwent a redesign in an effort to appeal to a market it calls the "business professional."

    AOL's pending acquisition of Time Warner could alter these efforts, however. AOL executives already have hinted that Netcenter could just as well become a hub for spotlighting Time Warner's Web content.

    News.com's Jim Hu contributed to this report.