You can understand the drubbing applied to shares of At Home Corp. (Nasdaq: ATHM) over the last couple days.
After all, not every company might lose the exclusive franchise around which its entire business model is based. That's what's going to happen to At Home if appeals sustain a federal judge's ruling that basically gives cities the power to force AT&T to open its cable network to competitors.
Today's investors had removed almost 4 percent from At Home's market capitalization by early afternoon, but is it really time to worry yet? On Friday, At Home fell 10 percent. In an admirable display of investment fortitude -- or muleheaded stubborness -- at least some investment firms don't think so: analysts at Cruttenden Roth and Prudential Securities reiterated "strong buy" recommendations on At Home, and Stephens Inc. maintained a "buy" rating.
| Is At Home in trouble? |
Merrill Lynch's research department is hedging its bets by telling investors to worry, but keep a small amount of At Home in the portfolio.
The final outcome is by no means certain -- the ruling could easily be overturned. And no matter what the ultimate result, this thing will be tied up in court for years with appeals. For all practical purposes, that means At Home has the same opportunity it had before, with a few years head start to build a brand and establish customer loyalty with good service (a statement that would probably make at least a few current customers laugh, judging from anecdotal evidence). Given its highly capitalized and well-connected backers, the company has no excuse for failure.
Some analysts contend that as much as half of At Home's value is derived from exclusive rights to AT&T's cable lines. If that's the case, then the market has just been deluding itself all along, because, as previously mentioned, broadband has never been exclusive. Look at all the competition:
-- Roadrunner. Assuming it doesn't merge with At Home -- which it very well might now that AT&T is buying MediaOne -- this service will end up getting a sizable chunk of the cable market.
-- Digital subscriber lines. The Baby Bells are rolling out DSL at a faster than expected clip. Some parts of the country -- San Francisco, for example -- have DSL without cable competition. And at least one recent study concluded that DSL is faster than cable service during peak hours, although the coaxial guys could probably do something about that through hardware solutions, if they care to. But at least DSL speeds are usually consistent throughout the day, because the pipeline isn't shared.
-- Satellite and wireless. So far they've proven to be inferior solutions, but Hughes promises to improve DirectPC and Sprint recently acquired a broadband wireless provider that at claims to offer speeds more than double what the fastest cable modem in the world will get you.
In other words, At Home never has been any kind of "exclusive" broadband provider and in the future would have been even less so, regardless of any judge's ruling. And that's why from an investor's point of view, nothing about At Home has really changed.
The rest of the technology market was rising today. With two hours left in regular trading, the Nasdaq Composite Index was up 46.49 to 2524.83, the Dow Jones Industrial Average had gained 104.79 to 10904.63. 22GO>