Excite@Home - Excite@home, 1999-2001

EXCITE@HOME (1999-2001)

Excite@Home planned to move forward on three fronts. First, the company planned to grow its narrow-band Internet service, which had more than 28 million regular users. Second, it wanted to expand the @Home subscriber base, in part by targeting registered Excite users who lived in areas where @Home's cable partners already had upgraded their systems. Third, the company planned to develop new programming opportunities for the exclusive use of its @Home broadband customers.

As of mid-1999 Excite@Home had exclusive rights to provide high-speed data over cable to 67 million homes through 22 cable operator partners. The main problem facing the company was that its inventory of potential homes far exceeded the company's ability to install its service. In many cases consumer demand, fueled by the company's marketing efforts, exceeded the cable operators' ability to service that demand. Excite@Home principally was competing with telephone operators and America Online to build a critical mass of subscribers. In one promotion, Excite@Home offered three months of free service to convert AOL subscribers.

In June 1999 Excite introduced two new services, Excite Voicemail and Excite Voice Chat. With Excite Voicemail, which was free for up to 60 messages and 10 faxes per month, callers could leave voice messages or send a fax by calling a central toll-free phone number provided by Excite. Each user received a unique 10-digit extension number to be used with the toll-free number. To use Excite Voice Chat, which enabled voice conversations with other Excite chatters, users needed a personal computer, an Internet connection, a microphone, and speakers or a headset. Both services were ad-supported.

In July 1999 Excite acquired iMall for $425 million in stock. An e-commerce pioneer founded in 1994, iMall operated shopping portals and also offered e-commerce packages for businesses. The acquisition enhanced Excite@Home's shopping network by adding merchants and also built up its business-to-business e-commerce solutions. Additionally, the acquisition gave Excite@Home a new relationship with First Data Corp., an e-commerce transaction processor that owned 11 percent of iMall. Excite@Home and First Data teamed to offer merchants the ability to complete credit card transactions. iMall claimed that it could help merchants set up an Internet storefront in one day.

In October 1999 the company launched Work.com, a service for business professionals and their companies. It was the first step of the company's initiative to develop a business portal through its B2B division, @Work. Work.com also was available on Excite's recently introduced Business Channel, which carried company and product information on 36 industries. Work.com also included business applications, a directory of business resources, and links to other business-related areas on Excite. In December 1999 Excite@Home acquired electronic greeting site Blue Mountain Arts for $780 million and also launched a new consumer site, Excite Photo Center, where users could upload, download, store, edit, and print high-resolution photos.

At the beginning of 2000 Excite ranked third among Internet search engines in terms of unique visitors, behind Yahoo! and Lycos. In February Excite partnered with Dow Jones & Co. to produce Work.com, a Web site for small and medium-sized businesses. The new Work.com would include content from Dow Jones and Excite@Home's existing Work.com site.

In July 2000 Excite launched a new free online storefront service, called Freetailer. The service allowed small businesses to establish a presence on the Web at no cost. The company reported that more than 1,000 new businesses had signed up within the first 24 hours of the service being offered. Each e-tailer was given 25 megabytes of computer storage space and one gigabyte per month of bandwidth to accommodate site traffic. Excite Messenger, a new instant messaging application that replaced Excite Pal, was introduced in September 2000. Excite Messenger could be used in a text mode, as well as for voice chat if users' PCs were equipped with a microphone and speakers.

For 2000, Excite@Home lost $7.44 billion, compared to a $1.5 billion loss for 1999. Post-first quarter filings in 2001 by majority shareholder AT&T and by Excite@Home revealed the company's precarious financial position. AT&T said its investment in Excite@Home would reduce its first quarter income by $280 million to $320 million. Excite@Home reported that it needed to raise $75-$85 million by June 30 in order to maintain its operations and liquidity. Under a non-binding letter of agreement, AT&T agreed to provide the necessary cash in exchange for Excite@ Home's fiber network. Excite@Home would then lease back the network on a monthly basis for 20 years. The company solved its cash problem by selling $100 million of notes.

Excite@Home's financial problems primarily were attributed to shrinking online advertising revenues. The downturn in Internet advertising resulted in Excite@Home closing its operations in France, Germany, and Spain in mid-2001. The company planned to focus its European strategy on the United Kingdom and Italy, where there were better prospects for growth.

As part of AT&T's acquisition of MediaOne, AT&T phased out MediaOne's high-speed Internet access service, Road Runner, and replaced it with Excite@Home. Although Excite@Home had increased its high-speed cable modem subscriber base from 330,000 in early 1999 to more than 3.7 million in August 2001, costly investments contributed to the firm's financial problems.

Quarterly losses of $832.6 million in the first quarter and $346.3 million in the second quarter left Excite@Home's future in doubt. A filing addendum to its annual report included an auditors' statement that expressed "substantial doubt about the company's ability to continue as a going concern." Comcast and Cox both terminated their exclusive high-speed Internet access agreement with the company and opened their systems to other high-speed providers. With its stock trading at a 52-week low of less than $1 a share, Excite@Home also faced the possibility of being de-listed from the NASDAQ. By the end of 2001 the company had declared bankruptcy.