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@Home chief bullish for New Year's

CEO Jermoluk is ready to ring in 1999 with a spike in subscribers and a profit from expanded retail offerings by year end.

@Home chief executive Tom Jermoluk can't wait for New Year's.

Jermoluk expects a spike in subscribers for his company's broadband cable Net access and content service next year. Analysts, meanwhile, expect him to push the company to profitability by the end of 1999, by making the Net-over-cable service available at retail outlets.

Jermoluk, in an interview with CNET News.com, said two of the three key barriers to @Home expanding its market reach will soon be overcome.

For one, the industry adopted the DOCSIS (Data Over Cable Service Interface Specifications) @Home vs. AOL cable modem standard earlier this year, which allows consumers to buy DOCSIS-compliant modems that work with any service provider's equipment. 3Com has already started shipping its new standards-based modems, some of the first on the market.

@Home, meanwhile, is working to complete an auto-install process for its software that will no longer require an "installation bottleneck," or delay while consumers wait for technician to activate a service, the way the proverbial "cable guy" currently sets up TV service at home.

"All those pieces come together next year, and that's the big deal for us. That's how we're going to go from hundreds of thousands of users to millions of users, by engaging the retail channel," Jermoluk said.

The final hurdle is for @Home to start marketing its service through retail outlets across the country.

About 50 stores currently carry the @Home-in-a-box product, he said. The company teamed with CompUSA in September to sell the $39.95 kits.

By the middle of next year, the company's off-the-shelf Cable Internet Pre-installation Kit will no longer require technicians to set up cable modem access through a cable company. Consumers will be able to buy their own plug-and-play cable modem, install the software, and start surfing the Net.

"The demand for high speed has been there. But when users can install their own modems the growth of this company should explode," said Scott Ehrens, an analyst at investment bank Bear Stearns.

Ehrens expects @Home to have nearly 1.1 million subscribers by the December 1999 quarter.

@Home has agreements with 19 cable system operators that reach about 60 million homes in the United States. About 10 million of those homes have been upgraded with the two-way cable necessary to use the @Home service. As of last quarter, @Home had about 210,000 subscribers, or a 2.1 percent penetration rate.

Subscriber penetration rates are on the rise though, as cable operators and @Home began marketing the service, Jermoluk said. Some cable partners have seen penetration rates of 5 percent to 10 percent after 12 months of offering the service.

"The real key will be what happens to penetration after it's freely available through the retail channel," Jermoluk said. "Then you can start seeing, without all the scheduling and marketing, what you can really do."

Analysts are pegging @Home to be profitable during the fourth fiscal quarter of 1999. Ehrens, for example, is looking for a profit of 3 cents a share.

Last month the company posted a loss of $9.7 million, or 8 cents per share, in line with analysts' estimates.