|
Trying not to characterize it as a full-scale retreat, Excite@Home execs nevertheless announced the high-speed cable modem service would begin a strategic withdrawal from several key business areas and take a monstrous $4.8 billion writeoff for the fourth quarter 2000.
Not only is the company jettisoning several struggling media properties, it will also back away from a major residential DSL service. The move is part of a massive belt-tightening effort as the provider moves toward a competitive access environment.
Although net operating losses were lower than expected, the decision to take the write down resulted in an overall $5.43 billion loss for the quarter at $13.43 per share. The $4.8 billion write down includes $4.6 billion in goodwill and acquisition-related assets, with the remainder in losses from its public asset portfolio.
Saying the company had grown too complex with too many moving parts, outgoing CEO George Bell said during a Jan. 25 conference call that the new criteria for operations will center on promoting broadband and generating revenue-and that meant a move away from content and toward network operations as it positions for a future competitive ISP market.
"As promising as our story has been, it's been too complex-too many moving parts," Bell said. "Clearly, our broadband network is the center of our competitive advantage, and we have reduced our mandate now to two simple criteria: one, does an initiative leverage our broadband position and two, will it be profitable? If we can't answer 'yes' to both of those we will discontinue, sell or get out. Period."
The list of discontinued businesses includes the Enliven media advertising arm acquired in 1998 and the equally struggling iMall e-commerce hosting service acquired in 1999.
Excite@Home also will for the most part shelve plans to create a residential DSL offering in partnership with Rhythms NetConnections Inc., "because the economics no longer add up, and the uncertainty in the DSL industry makes such an effort look like a potential quagmire," Bell says.
After the conference call, however, Excite@Home modified its DSL plans. The @Home Solutions Group will go ahead with DSL launches in selected markets, but there will be no network-wide rollout. The company did not provide any information on which markets would potentially be targeted or when DSL service might be offered.
Meanwhile, the new focus will be on Excite@Home's main asset-its backbone network and e-mail assets. To that end, the company would start in 2001 to upgrade capacity to OC-192 for more than half of its backbone network, increasing throughput speeds more than 300 times compared to its existing OC-48 capacity.
In keeping with Excite@Home's new get-real philosophy, the company is also revising its 2001 subscriber projections downward. Compared to the 28 percent increase it racked up in the fourth quarter, the projections hover in the 12 to 20-percent range for the first two quarters of 2001, and revised its year-end subscriber total from 6 million to between 5.2 and 5.6million.
The company is also projecting continued weakness in its remaining content media portfolio and low subscriber growth in the first quarter.
"The first quarter will by far be the low water mark of our financial performance in 2001," said Mark McEachen, executive vice president and chief financial officer.
While the executives stressed the positive sides of the refocusing effort, Wall Street wasn't impressed. Stocks plunged almost $1 per share the day after the announcement and are now hovering at about $6 per share.
It also sent parent company AT&T Corp.'s year-end results into a tailspin. The telecommunications giant closed 2000 with a $1.7 billion loss and a 50-percent operating profit drop, blamed mostly on Excite@Home's financial restructuring and costs from the acquisition of cable's MediaOne Group.
|
