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Stock in Excite@Home flirts with new 52-week low

Despite a frenzy of interest in high-speed Net access, Excite@Home shares are trading near their lowest point in the past year.

Excite@Home may be the undisputed leader of the hot broadband market, but it's getting no respect on Wall Street.

Shares of Excite@Home, which has more than 1 million customers, traded earlier today at their lowest point in the past year before recovering. After dipping to as low as $26.75, the shares ended the day at $30.75, up $1.88.

Today's initial weakness reflects a steady slide that began in April--a decline that runs counter to the industrywide excitement over all things broadband and the series of steps Excite@Home has taken to explain its sometimes murky strategy.

"It just feels like the wind has come out of the sails," said Ted Henderson, a cable industry analyst at Janco Partners, an investment firm specializing in the telecommunications industry. "We clearly are in a momentum-based market. The momentum works both ways to drive these stocks."

Excite@Home representatives declined to comment, citing the company's policy against stock price speculation. Company insiders, however, say the decline has left some executives scratching their heads.

Although Internet access over cable wires is a new technology, its potential is huge, analysts say. Consumer demand for high-speed Net access has exploded as Web sites push e-commerce and offer broadband content such as streaming video.

To date, only 2 million customers access the Net over cable lines, but nearly 100 million U.S. households will soon be able to surf over upgraded cable networks. Thus said, analysts believe services such as Excite@Home and Time Warner's Road Runner will succeed with consumers--as well as investors.

A recent study by Strategis Group forecast cable modems will claim 46 percent of the 25 million subscribers in the high-speed Net market by 2004.

With others seemingly in agreement that content and high-speed Net access could be a powerful combination--as evidenced by America Online's merger with Time Warner--Excite@Home would seem to be in an enviable position.

Yet despite reporting a quarterly profit, Excite@Home--like many Net companies--has lost a lot of money.

"For the last fiscal year, the company posted a net loss of $1.46 billion, so you can understand why investors might be a little cautious," said Drake Johnstone, vice president of research at Davenport & Company, a financial services firm.

A number of other issues could be dogging Excite@Home?s stock, analysts said. Some believe the stock slide began with the threat of new regulations over cable open access. Open access legislation would allow Internet service providers access to cable networks owned by the likes of AT&T, a cable partner of Excite@Home.

Analysts say that open access could threaten Excite@Home?s position as the leading broadband ISP.

"The market is concerned about open access. AOL and Time Warner said they will open their lines to companies, and AT&T will follow suit after their deal ends with Excite@Home. This means more competition that will likely pose a threat to growth," Johnstone said.

As part of You've got Time Warnertheir multibillion-dollar merger deal, AOL and Time Warner agreed to open their cable networks to competing ISPs, although they did not offer a time frame for the transition.

Questions over the marriage of broadband and content have also dogged the firm. Some in the industry felt that AT&T, following the merger of @Home and Excite, wasn?t completely convinced of the deal?s benefit. Rumors also addressed the possible sale or split of the two businesses.

To calm some of these concerns, Excite@Home agreed to issue a tracking stock for its content and media properties. The company also recently topped 1 million subscribers and posted its first quarterly profit, a rarity for Internet companies.

Wall Street analysts, who continue to maintain "buy" or "accumulate" ratings on Excite@Home, believe the company's stock will bounce back since they believe the company is the clear leader in the booming broadband market.

"Broadband high-speed High speed pipe dreams?access right now is a positional game. Who is best positioned to deliver? Because nobody is doing it smoothly and hitting on all eight cylinders right now," Janco's Henderson said. "But nobody is better positioned than Excite@Home."

Excite@Home has multiyear partnerships with some of the nation's largest cable operators. And the company has an early jump on the international Net access market, with several overseas joint ventures already in place.

Those assets lead some analysts to believe Excite@Home stock, at its current depressed levels, is a great buy. Investment house Chase H&Q lauded the stock in a recent research report and set a $50 price target.

"Excite@Home shares have been severely pressured over the last year as a result of concerns regarding open cable (regulations) and the Excite merger. We believe forthcoming partnerships with DSL providers and the issuance of a tracking stock for the Excite business could catalyze stock performance," Chase H&Q analyst David Levy, who has a "buy" rating on the stock, said in the report.

"We believe Excite@Home is positioned to be a primary beneficiary of the largest and most untapped growth area of the Internet, namely high-speed services to and from the home," Levy wrote.'s Sam Ames contributed to this report.