Excite@Home looks for boost in new CEO, profit
After a draining year, Excite@Home believes a new chief executive and a profitable quarter might just be the kind of transfusion it has been searching for.
The firm today posted its first-ever profitable quarter, reporting pro forma income of $514,000, or zero cents a share, compared with a loss of $4.5 million, or 1 cent a share, for the same period a year ago. Revenue rose to $128.8 million, up from $73.3 million a year ago.
At the same time, Excite@Home confirmed earlier reports that president and former Excite chief executive George Bell will take over as CEO, while Tom Jermoluk will continue as chairman of the board.
The change in leadership comes after a tumultuous year for the broadband access and content company. Conflicts over strategic direction, external regulatory pressures and slipping market share for its Web portal hit the company where it has been most vulnerable: its stock price.
Including one-time items, the company reported a net loss of $723 million, or $1.93 a share, for the quarter.
Financial analysts had conservatively predicted Excite@Home would post a "break-even" quarter, with earnings of zero cents per share, according to First Call.
Yet following the firm?s first anniversary as a combined broadband-content company, many strategic questions still remain. New initiatives and renewed relationships with the company?s cable partners may help answer some of those queries, the firm?s newly appointed CEO said.
"I'm very committed to making sure our alignment with our cable partners is airtight," Bell said in an interview with CNET News.com. "You've always got the potential for closer alignment when you've got new blood."
With more than 1 million subscribers and plans for a tracking stock for the Excite media assets, Bell said that 2000 will be a better year for Excite@Home.
Bell becomes the company's third chief executive, after Jermoluk and Will Hearst, a partner at venture capital firm Kleiner Perkins Caufield & Byers. Hearst led the company on an interim basis before the former @Home Network went public in 1997.
Already Bell is taking strides to reaffirm Excite@Home's role as Internet industry leader, a position that has been in question since the two companies announced their merger a year ago.
"The company has gotten kicked around a lot in the past year as the stepchild of the cable companies and as a stepchild of regulators," Bell said during an earnings conference call. "But guess what? The company is not a stepchild to anyone. We are the leaders in broadband today, and will be tomorrow."
Chief among concerns has been the company's relationship with its cable partners, such as AT&T, Cox Communications and Comcast, which are both investors and board members.
Excite@Home executives believe the tracking stock will help solve a number of issues. First, it will help separate the two different sides of Excite@Home--the broadband access business and the content business--allowing investors to track the value of each individually. Additionally, the stock will free the firm to use its stock as an acquisition tool without diluting cable operator ownership.
Bell's new blood, coupled with the freedom executives hope the tracking stock will bring, will allow the narrowband Internet assets to actively seek new deals and partnerships.
"The fight in Excite is back," Bell said. "It's a new era in that we have the board sanctioned freedom to be more aggressive.?
The company also expects to launch a new high-speed version of its Excite Web portal by the end of the first quarter, executives said. A full version of the service will first be available to Excite@Home's cable modem customers, with a scaled-back version following shortly on the Internet.
Executives said they plan to negotiate deals this year with digital subscriber line (DSL) providers, fixed wireless companies, and even satellite data firms to deliver their new high-speed portal in regions where its partners don't own cable systems.
Bell said the company could even offer its content via DSL or wireless alternatives within its cable partners' markets, if systems are not yet upgraded for data capabilities.
For the year ended Dec. 31, Excite@Home reported a pro forma loss of $14.6 million, or 4 cents a share, compared with a loss of $46.7 million, or 14 cents a share, in 1998. The pro forma results reflect the combined historical results of Excite and @Home, which completed their $7.2 billion merger last May. The pro forma results exclude various items related to the merger.
Excite@Home also announced it finished 1999 with 1.15 million subscribers. Most analysts predicted the company would end the year with between 1 million and 1.1 million customers. By comparison, No. 2 cable modem service provider Road Runner finished 1999 with 550,000 subscribers.
Stock in Excite@Home closed at $42.94, a loss of less than 1 percent, ahead of the earnings news. Shares have traded as high as $99 and as low as $33.12 in the past year.