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Excite@Home sees lower revenue

The high-speed Internet provider warns that the company anticipates lower-than-expected first-quarter and full-year revenue because of weak advertising sales.

Excite@Home, a major high-speed Internet provider, warned Tuesday that it anticipates lower-than-expected first-quarter and full-year revenue because of weak advertising sales.

The company also said that it has ended its pact with Cablevision Systems and will seek more financing to weather a tough 2001.

Excite@Home said that for the rest of the year, Wall Street should expect "significantly lower revenues, greater operating losses and more rapid use of cash than previously forecast."

As a result, AT&T, which owns a majority controlling stake in Excite@Home, has signed an agreement to provide the high-speed Internet access company with an additional $75 million to $85 million in funding under a restructuring plan for a previous fiber-optic network deal.

Excite@Home said it also will seek additional debt or equity financing elsewhere. The company said there would be "a material adverse impact on the company's operations and liquidity" if it does not reduce expenses and raise at least $75 million to $80 million by the end of the second quarter.

Executives said on a conference call Tuesday that the media business continues to deteriorate, pushing the company to focus its resources more than ever on the broadband network.

"We've seen lower visibility into media for (the rest of the year). Our actions today are to further prioritize the broadband network," Excite@Home Chief Executive George Bell said.

Bell said the company also is considering selling some of its media and content properties and may be forced to lay off more employees to raise cash and cut costs.

"Another source of cash would be the sale of non-broadband media assets. We are looking into that, both as a way to further focus on the core broadband business as well as seeing those potential asset sales as a source of cash," Bell said. "I would expect that we will probably need to issue staff reductions to meet our overall cash conservation plan."

Executives reiterated that despite the gloomy financial outlook, the high-speed Internet half of the company continues to do well. "It's really the non-broadband elements of the business that are underperforming," Bell said.

The profit warning, cash crunch and termination of its alliance with Cablevision, a large cable TV operator, mark the latest hiccups for Excite@Home. The company has seen its shares slump amid a general technology stock malaise and an uncertain strategy in recent years.

"It's been something of a disintegrating situation (at Excite@Home). The Cablevision deal is just emblematic of that," said David Lee Smith, a senior analyst at Dain Rauscher Wessels. "We have a 'neutral' on the stock because, frankly, we don't know where it goes. They've obviously got some financial problems over there, the most alarming of which would be the cash crunch."

Excite@Home is now focusing on its core high-speed Net access business and on cutting resources for the Excite.com portal, once the No. 2 such destination Web site, and other online media and content properties. Excite@Home laid off 8 percent of its staff in January and has seen several top executives leave the company in the past year.

Preliminary results
Excite@Home, which issued the profit warning less than a week before it expects to report its final numbers, now expects to report first-quarter revenue of between $140 million and $145 million, compared with $138 million for the same period last year. The company anticipates a per-share loss, excluding non-recurring charges, of 14 cents or 15 cents, compared with a year-ago quarterly per-share loss of 1 cent. For the first quarter Wall Street was expecting a loss of 13 cents, according to First Call.

Excite@Home said it expects to take a charge related to its media and content businesses during the first quarter. During the fourth quarter it took $5.4 billion in charges related to write-downs on its media units.

The company is reportedly close to naming Patti Hart, a communications industry executive formerly from Telocity and Sprint, as its new chief executive and president, according to The Wall Street Journal.

The company had promised to name a replacement for CEO George Bell, who announced his resignation in September, by the end of the first quarter, or late March. A CEO announcement has been expected for weeks and could come in conjunction with the company's quarterly financial results. The company will announce its first-quarter report Monday afternoon.

"I can confirm that we've talked to Patti Hart," Bell said during a conference call Tuesday morning. "I think we're relatively close to naming a CEO, but I'm not going to say anything more about it. I would expect that we can make an announcement in the reasonably near-term future."

The company also expects to end the quarter with cash and short-term investments totaling about $105 million, down from $201 million at the end of the year.

Excite@Home said it ended March with 3.2 million subscribers, up 16 percent from the end of the year.

"Our core broadband business is strong," said Bell. "Subscriber growth continues at a rapid rate, our network is performing at record levels of scale and reliability, and we see important new opportunities developing in areas such as content delivery, wholesale services and premium services. However, a weakening advertising environment has adversely affected our narrowband media business."

The subscriber total excludes customers from Cablevision, a large New York-based cable operator with which Excite@Home has had a partnership for years.

The company said it will seek to recover more than 20 million performance-based warrants that previously had been issued to Cablevision as part of the companies' relationship.