Clear!

Excite@Home received a financial defibrillation last week when the Internet content and service provider received an $85 million cash infusion from AT&T, its largest shareholder. The companies renegotiated their long-term optical-fiber contract, satisfying Excite@Home's short-term cash needs.

Added to the $100 million raised via convertible note sales earlier this month, the company has more than doubled the $75 million to $85 million it said in April it needed to survive. In a conference call to investors, the company said it was funded well beyond the end of this year.

The new agreement abandons the 20-year, lump-sum deal announced in January 1999 that let Excite@Home create its IP backbone. Under the new terms, Excite@Home agrees to pay AT&T $8.8 million per year for 18-and-a-half years at an 8% annual interest rate. An Excite@Home spokeswoman said although the company will pay more long term, the refund amount is “in the ballpark” of its original payment.

“Given our short-term cash needs, we believe this transaction balances our cash needs,” said Excite@Home chairman and CEO Patti Hart.

Fueled by rumors it would sell its Excite Internet portal, Excite@Home shares fell 16% prior to Tuesday's call. Hart did not confirm or deny a potential Excite sale but said the company would focus efforts on the access market and look to integrate existing assets into the broadband application space.

“Certainly, we're not funding our company through the sale of strategic assets either today or going forward,” Hart said. “We'll entertain those offers, but that wouldn't be a funding plan for the company currently.” Excite said it will continue moving away from its media operations.

“Obviously, the growth factor of the company is the access business,” said Mark McEachen, executive vice president and chief financial officer for Excite@Home. “We are not counting on a robust media market this year.”

With the downturn in Internet advertising spending, the portal has been a capital drain on the @Home side of the business, and cutting Excite loose would not harm the company, according to Rob Lancaster, analyst for The Yankee Group.

“I wouldn't be surprised if there is a sell-off of Excite or even a closure,” he said. “If somebody came to them tomorrow with the right price, they would move that operation.”

Separately, Excite@Home announced it would terminate exclusive contracts with Cox Communications and Comcast in December — six months ahead of schedule. Excite@Home said the move toward an independent business model was necessary as the market moves toward open access. However, all three companies said they are in negotiations and expect to continue nonexclusive commercial distribution relationships.

“The end of exclusivity is part of the natural evolution of our relationships with our cable partners,” said Matt Jones, chief operating officer for Excite@Home.

AT&T's exclusive contract with Excite@Home expires in June 2002. Representatives at AT&T said they did not expect contract termination before then. Excite@Home said all its exclusive agreements would expire by late 2002 or early 2003.