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Book closes on Excite@Home

The nation's largest broadband provider is closing shop at midnight in an outcome that few employees or customers could have imagined when they signed on with the company.

REDWOOD CITY, Calif.--Stacks of disassembled office furniture, rows of boxed computers and a bright yellow moving truck idling in front of the company's headquarters mark the final chapter of high-speed Internet provider Excite@Home, which will cease operations at midnight Thursday.

Reception desks in Excite@Home's sprawling office complex were vacant this week, and the few employees who were not laid off in recent months did not answer phones. But outside, professional movers from a liquidation company were busy carting assets to trucks destined for auctions or creditors. Employees were loading personal belongings into their cars as they filed out of the office for the last time.

"It's hard to watch something you spent so much time and effort building go away," Jennifer Kurkoski, an Excite@Home project manager who worked for the company for five years, said Wednesday. "But I learned an incredible amount and worked with some extraordinary people."

Although the situation for the employees may be bittersweet, legions of Excite@Home's former customers are simply bitter. Hundreds of thousands of them have endured outages and slowdowns as Excite@Home cable partners have transferred customers to independent networks run by AT&T, Cox Communications, Comcast, Rogers Communications, MediaOne Group and others.

Many have lost e-mail or important electronic attachments, including tax documents, during the transition. Others are steamed because cable partners have limited features such as VPN (virtual private network) support and newsgroups without reducing the cost, averaging $46 per month.

And it could get worse for some. Customers of cable partners that have not transferred them to independent networks will be completely without service at 12:01 a.m. Friday, according to Excite@Home sources and filings in bankruptcy court in San Francisco. Although it's unclear which, if any, of Excite@Home's partners have not yet switched customers, the major providers such as AT&T, Cox and Comcast have already made the switch.

Destined for demise?
Few employees or customers could have imagined that Excite@Home would come to this. Venture capitalists and executives created Excite@Home in January 1999, when Web portal completed a $6.7 billion merger with @Home--the largest deal between Internet companies. The company provided the optical backbone for its cable partners, and it eventually amassed 4.1 million subscribers--45 percent of Americans with home broadband access.

see Special report: Excite@Home marriage doomed at the altar? But the company may have been doomed from the start. AT&T, which at one point had its own executives occupying more than half of Excite@Home's board of directors, never condoned the merger. Cultural clashes soon erupted between Ma Bell's conservative "cable guys" and the younger Silicon Valley honchos who ruled Excite. The young company quickly lost focus, and customers began complaining of outages, slowdowns and advertising campaigns that didn't deliver on the company's promise of reliability.

By summer 2001, Excite@Home's cable partners had decided to bail out and build their own fiber-optic networks, forcing Excite@Home to file for Chapter 11 bankruptcy protection. Excite@Home planned to sell its assets to AT&T for $307 million and then go out of business.

But Excite@Home bondholders balked at the deal, saying the assets were worth at least $1 billion. AT&T, which was building its own network and preparing to transfer more than 850,000 customers to it, rescinded the $307 million offer.

Now all that's left of the company is a spate of lawsuits from creditors, ranging from Verizon Communications, Qwest Communications International and Microsoft to Silicon Valley landlords and janitorial companies. In fact, although the company will officially cease operations at midnight Thursday, it will live on in bankruptcy court for months.

Creditors filed lawsuits trying to wring out money from Excite@Home as recently as Tuesday, when consulting giant PricewaterhouseCoopers demanded 80 percent of fees and 100 percent of expenses for services in November and December. On Friday, lawyers representing Excite@Home are scheduled to appear in court to hammer out a "uniform procedure" to handle such requests.

In addition to dealing with payment requests by phone companies, computer equipment makers and financial advisers, lawyers must deal with Excite@Home's property-tax collectors and landlords. Landlords filed suit against Excite@Home on Feb. 22, insisting that generators, automatic transfer switches, uninterruptible power supplies, computer room air-conditioning units and other heavy equipment at the company's headquarters were "alterations" or "tenant improvements."

If a judge agrees, the landlords get to keep the equipment--a small consolation, as the landlords insist that Excite@Home owes them property taxes and other payments. But if a judge deems the goods "trade fixtures," they're considered the property of Excite@Home--and the company can sell the equipment to provide cash to creditors other than the landlords.