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@Home struggles, stock spikes

The cable Net provider is losing money and is in need of a stronger customer base, but its stock is soaring.

@Home (ATHM), which potentially could provide Net access to half of the homes in North America that have access to cable, is losing money and has fewer customers (55,517) than the population of Palo Alto, California, at least at last count.

But its stock, which only began trading publicly last July, is soaring. The company's shares jumped another 2-1/8 points in midday trading today, to reach 37--just shy of its @Home stock 52-week high and more than triple its $10.50-per-share initial offering price.

This year alone, @Home's stock has risen 44 percent. Its market cap now stands at a hefty $3.2 billion--an impressive figure considering national ISPs short life as a public company.

So why the run-up? A combination of factors: the promise of Net access via cable, continued and consistent execution of @Home's business plan by its management, and perhaps a "short squeeze" on the stock by arbitrageurs. In a short squeeze, the price of a stock is driven up as short sellers try to cover their losses. The run-up of Internet stocks this week, including that of @Home, caught many traders by surprise.

@Home declined any comment on its stock price and the market activity.

@Home's run-up most likely is driven by its potential to provide a "big pipe" that would carry voice, video, and data to a mushrooming number of Web users.

Also, @Home's business strategy, in addition to its management--which includes Thomas Jermoluk, formerly the "party-hearty" COO of Silicon Graphics, as Hoover's Guide puts it--continues to impress many Wall Street analysts. Just today, for example, the stock was rated "accumulate" in new coverage by analyst Axxel Knutson at Janssen Meyers Associates. Most analysts who are following the stock have given it "buy" recommendations.

As previously reported, the company has been in talks with Time Warner's Road Runner about a business combination. A deal would consolidate the industry's two biggest players and boost penetration with a single brand. AT&T also might pump money into the combined company, providing a further boost.

@Home's stock jumped when word of the merger talks leaked. The shares also rose following last month's deal that called for @Home to be the technology provider for email accounts on all of Tele-Communication Incorporated's next generation of advanced digital set-top devices. The pop occurred despite an embarrassing but unrelated episode that slowed the receipt of email to @Home customers because of a mass email attack.

In light of the run-up, some @Home executives are taking the opportunity to sell some of their stock, according to recent regulatory filings. But the sales (7,000 shares at between $34 and $35 per share, for up to $245,000 in one case) represent only a fraction of their total holdings.