Excite@Home lays off 8 percent of staff

As first reported by CNET News.com, the cutbacks were announced to employees at a staff meeting Tuesday and a formal announcement is expected this afternoon.

The layoffs were effective immediately and primarily affected Excite Studios, a producer of media content. Further cuts were made among advertising sales positions and general administrative workers such as finance, human resources and marketing employees, a spokeswoman said.

Unaffected by the layoffs were employees in the company's core broadband access division, Excite@Home's business-focused unit @Work, and its network operations team, according to representatives.

The layoffs mark the first substantial cutbacks for the beleaguered company, which has lost about 80 percent of its stock valuation in the past year.

In a press release Tuesday afternoon, executives said the company, which has only posted one profitable quarter in its six-year history, is striving to get the company's finances into the black.

"While content services remain a compelling element of our opportunity, it is critical that the cost structure of our media business correlate with the changing online media world," said George Bell, chief executive of Excite@Home. "As we mature as a business and drive towards profitability, we continue to refine our core business.

"We are as optimistic as ever about the accelerated adoption of broadband services by consumers, underlined by our strong year-end broadband subscriber growth," Bell added. The company closed 2000 with 2.95 million customers.

Rumors about layoffs at the company, which before the layoffs employed about 3,000 workers, have circulated for months as Excite@Home has redefined its content strategy. The company shifted development resources toward broadband content and away from narrowband last April, and brought in a new management team.

The layoffs are intended to cut costs in the face of a slowing online advertising market. The company is just one of dozens of Internet-related businesses to reduce its work force in the past year.

"It's about refining our core business to drive profitability and to better align our cost structure with revenue expectations," said an Excite@Home spokeswoman.

Some analysts have been waiting for layoffs from Excite@Home.

"Their access business, MatchLogic unit and business services are doing great, but the media business is just not doing well and they've not cut costs there," Abhi Gami, an equity analyst at investment bank William Blair, said recently. "They've waited too long. The heads will roll."

Gami, who had expected layoffs of at least 10 percent, said "their cost structure is just too high."

The online advertising market has been hurt in recent months by dozens of dot-com closures and the tighter capital markets. Internet bellwether Yahoo, which is largely supported by advertisements, trimmed its 2001 financial guidance for Wall Street this month, bolstering investors' fears that ad-supported Internet companies could stumble.

"Internet advertising's taken a downturn. The market's shrunk; we've got to shrink accordingly," Excite@Home spokeswoman Alison Bowman said. "Media remains a really integral part of the company. This doesn't signal that media's not important to us."

Excite@Home is expected to report fourth-quarter financial results after the close of regular trading Thursday. Wall Street is expecting a loss of 9 cents per share, according to analysts polled by First Call.

The company also is expected to outline its 2001 fiscal guidance for Wall Street analysts.

Meanwhile, sources say that Excite@Home is getting closer to naming a new chief executive to replace George Bell, though an announcement is not expected imminently. According to sources, the new CEO may come from outside AT&T, Excite@Home's controlling shareholder, contrary to what some company watchers have speculated.

"The CEO they choose will have to be able to walk through many minefields," said one source familiar with Excite@Home's board of directors. "AT&T wants a CEO who can truly operate as that company's CEO, but one who'll be responsive to their needs as a majority owner."

Excite@Home is also looking for a CEO who has a good operations background and can focus on the network aspect of the company's business, as opposed to its media operations, the source said.

News.com's Dawn Kawamoto contributed to this report.