@Home remodeling

CEO opening may give AT&T another chance to assert control over cable ISP

Excite@Home Chairman and CEO George Bell is giving up his second title. Questions surround the shift, but the largest may be this: Is Bell pulling a Bill Gates, stepping back from the company's day-to-day operations to spend more time strategizing for his company, or is AT&T pulling strings to exert tighter control over the No. 1 cable ISP?

Bell announced last week that he will vacate the CEO chair as soon as - but not before - a replacement can be found and said a recruitment team already has started searching for a successor. He will stay on as chairman of the company until the end of 2001.

Speaking after the announcement, Bell said Excite@Home's growth has made it more difficult to combine long-range planning and daily oversight - more than he had expected when he assumed the two posts following the departure of former Chairman Tom Jermoluk last May.

"The company has four or five major business units - Excite, @Home, our MatchLogic ad targeting unit and our international operations," Bell said. "At the end of this year, @Home will do an annualized run rate of $400 million in gross revenue; it will leave next year doing $800 million in gross revenue. So the scale and the scope of all our businesses combined have gotten larger than we thought, faster than we expected. I thought it was time for the company to have a full-time, California-based CEO."

Bell, who was CEO of Excite before the Web portal company merged with @Home, became president of Excite@Home in January 1999 and has shuttled almost weekly between the company's Redwood City, Calif., headquarters and his Boston home for the past year.

But the question remains: Why split the duties of corporate leadership five months after combining them?

Bell did not anticipate how important and time-consuming it would be to maintain good relationships with Excite@Home's cable partners - one of the chairman's chief tasks and something at which Jermoluk reportedly had been adept.

"There's not another large Internet company today that I know of that's got AT&T and a number of other large media companies as both owners and distribution partners," Bell said. "I found that any time I can spend with AT&T, Cox Communications, Comcast, Rogers and Shaw has been really valuable. But they're all located on the East Coast, and dealing with them is really a full-time job. And I need to spend more time overseas, which is where we see more of our growth opportunities emerging."

The demands of the cable relationships were a revelation to Bell. "I came from the Excite Internet side," he said. "On the Internet, because all the companies are so young, relationship management means, `Unless things are really in trouble, you don't have to call me.' The cable business is more mature, and that's not the way mature companies work."

Maintaining a good relationship with AT&T has not been easy for Excite@Home. The No. 1 U.S. cable operator plans to bundle residential cable telephony and high-speed Internet; at times, its officials made no secret of their displeasure with Excite@Home's performance and execution. About a year ago, rumors began circulating that AT&T Chairman and CEO C. Michael Armstrong wanted to see the cable ISP spin off its Web-content business - Bell's responsibility at Excite - into a separately traded division.

That talk died when AT&T re-engineered the governance of Excite@Home to bring it more directly under AT&T control. AT&T now has expanded its role on Excite@Home's board of directors, and the ISP's results will be included in AT&T's financials, although it will also issue its own reports.

Lately, AT&T alumni have shown up in large numbers on Excite@Home's management team, including the two executive vice presidents in charge of consumer and commercial broadband services. Other executives are expected to depart in the near future, including those in charge of programming, online products and customer care. Two weeks ago, Excite@Home replaced its Chief Financial Officer Ken Goldman with Mark McEachen, the former treasurer of DirecTV parent Hughes Electronics - the company Armstrong headed from 1993 until he was elected to lead AT&T in 1997.

Bell's move may give AT&T an opening to assert its control at the highest level of Excite@Home, said Frederick W. Moran, head of Internet research at Jefferies & Co.

"AT&T will want to clean house and put its own candidate in place," he said. "It remains to be seen whether they can do that."

But the search will not be biased toward candidates from any company and a CEO prospect could emerge from within Excite@Home, Bell said.

Although candidates are expected to appear fairly quickly, Bell is not pressuring the company to produce a new CEO by a deadline. "I want the company to get a great new CEO organically, not through time pressure," he said. "If I were to continue as chairman and CEO for the next six months, it wouldn't surprise me at all."

Making the search public was a way to avoid dealing with an outbreak of rumors down the road while the company fights to defend its stock price, he said.