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@Home sees increase in subscriber base

Wall Street analysts say they are impressed with the increase in subscriber numbers, but downplay @Home's decision to restate earnings to account for a previously reported distribution deal.

Wall Street analysts say they are impressed with @Home's boost in subscriber figures and are unfazed by the data-over-cable company's decision to restate earnings to account for a previously reported distribution deal.

@Home yesterday announced it ended the year with 330,000 subscribers, slightly higher than the 300,000 that many industry analysts expected.

"This shows not only strong demand for the service, but also [cable operators'] ability to meet that demand," Bear Stearns analyst Scott Ehrens wrote in a report today.

@Home began 1998 with 50,000 subscribers and had 210,000 customers as of last quarter. Many analysts expect cable modem use to boom in 1999.

BT Alex. Brown reiterated a "buy" rating on @Home today and a similar report from Deutsche Bank analyst Alan Braverman found that "in store retail promotions are tracking better than expected ? [and have] resulted in several thousand new @Home subscribers."

Braverman has an "accumulate" rating for @Home stock.

@Home also said it will reverse previous non-cash charges taken in the fourth quarter of 1997 and first quarter of 1998, as well as restate its second and third quarters of 1998. The charges were related to its distribution deal with Cablevision Systems.

@Home at the time had opted to account for the charges in those two quarters, as opposed to spreading it out over the 57-month agreement. After discussions with the Securities and Exchange Commission, @Home will amortize the deal over the 57 months.

As a result, the company will restate the fourth quarter 1997 and the first quarter of 1998 with a lower net loss. And it will restate the second and third quarters of 1998 with a higher net loss, the company said. @Home will report fourth quarter 1998 and year-end earnings January 20.

Many analysts predict the new accounting method will increase expenses by more than $13 million each quarter for the next three to four years.

"Based on our preliminary calculations," Ehrens wrote, "We believe this adjustment will increase the loss per share by 11 cents in the fourth quarter of 1998 to a loss of 17 cents."

Ehrens now expects @Home's first break even quarter, in which the company no longer loses money, to be pushed back to the fourth quarter of the 2000 fiscal year, rather than the 1999 fourth fiscal quarter.