Excite@Home's Bell Rings Cost Alarm4/22/2001 8:00 PM Eastern
A slumping advertising market has forced Excite@Home Corp. to slash costs and possibly sell off its broadband network infrastructure to AT&T Corp. to raise desperately needed cash.
In a conference call with analysts, chairman and CEO George Bell said the company must raise about $75 million to $80 million to get it through the rest of the year. Bell said Excite@Home can employ several options to raise that money, including a sale/leaseback arrangement for its network infrastructure with AT&T that could bring in between $75 million and $85 million.
The advertising downturn has been limited mainly to its Excite.com Internet portal, not its residential and commercial broadband businesses, said Bell.
"We see a soft market out there, at least through the end of the year and beyond," Bell said. "Some of the diversification efforts we have made to move our media businesses beyond banner [ads], although going quite well, are not big enough to turn around the ship."
On the cost-cutting front, Bell said Excite could expand its relationship with AT&T. The two companies could work on joint initiatives that would bring more stability to the broadband network and drive down the data company's costs. He added that it was likely that the company would also have to reduce its work force to meet its objectives.
"We would not rule out staff reductions," Bell said. "I expect we will probably need to do some staff reductions to achieve the goal of our new operating plan."
Excite@Home laid off about 250 workers in January.
Revenue for the first quarter, which ended March 31, would be between $140 million and $150 million, Bell reported. Net loss per share would be between 14 and 15 cents per share. That compares to revenue of $138 million on a loss of 1 cent per share in the first quarter of last year.
To raise the capital, Bell said, Excite@Home has several options open to it, including third-party debt or equity financing or a sale of its nonbroadband assets. He said he hopes to finalize some kind of deal by the close of the second quarter.
Bell also discussed reports that Excite@Home would hire Patti Hart, CEO of Telocity Inc., to be its new president. He confirmed that the company has held discussions with Hart, but stopped short of saying she had the job.
"We're not making any announcements," Bell said.
Bell added that Excite@Home would no longer report subscriber revenue from Cablevision Systems Corp., one of the high-speed data service's original partners. He said Excite@Home would take steps to reclaim the performance-related warrants Cablevision owns for about 20 million shares of Excite@Home stock. Those steps could include litigation, Bell said.
"We've had a difficult relationship with Cablevision almost from the start," Bell said. "The intention is to terminate that deal."
Bell said Cablevision was not generating revenue for Excite@Home — the MSO has preferred to push its own high-speed data service, Optimum Online — and that generating revenue was required in the warrant agreement.
"We will do whatever is necessary to recover the warrants," Bell said. "At this point, we see no avenue of pursuit that is closed to us."