Limping Excite Portal a Drag on Results

7/29/2001 8:00 PM Eastern

Troubled Excite@Home Corp. narrowed its losses in the second quarter, but continued weakness in its media business is expected to put pressure on its cash reserves in the future, the company said last week.

Net losses improved in the quarter to $346.3 million, or 85 cents per share, from a loss of $668.3 million, or $1.69 per share, in the same period last year. Total revenue declined 7 percent to $138.6 million.

But revenue at the media business, which consists mainly of Excite@Home's narrowband online operations, such as the Excite Web portal, fell to $28.6 million in the second quarter from $74.7 million in the prior year.

In a conference call with analysts, Excite@Home CEO Patti Hart said the online-ad business was to blame for shrinking cash flow, which was negative $12.3 million in the quarter.

The media business has been a drag on the company's earnings for the past two quarters and has been on the block for months. The unit's continued bad performance also will force Excite@Home to seek additional cash by the end of the year, even after it had already raised $185 million through warrant issues and a sale-leaseback agreement with AT&T Corp. for its backbone network.

"At this point, we have no intention of investing additional money in narrowband revenue growth," Hart said in the conference call.

Hart would not reveal just how much additional funding Excite@Home will need, adding that the company "continues to explore alternatives."

Those options include selling off the unit or simply shutting it down. Hart said the company has been in contact with interested parties, but she has yet to find a deal that would be "a good balance between value for our shareholders and strategic importance for the company."

"The attractive transaction for the media business is not just a financing transaction that raises cash for the company," Hart said. "It has to be a value we think is appropriate for our shareholders, but more importantly, of long-term strategic value to the company."

The downturn in the media business offset strong growth in the broadband side of the company, with cable-modem subscribers increasing by 474,000 in the period, to 3.7 million, and revenue rising 71 percent, to $89.7 million.

The company said it expects the broadband subscriber count to rise by 1.1 million to 1.4 million by the end of the year.

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