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It's getting harder to know who to believe any more, especially when it comes to the fate of struggling broadband businesses. Take Excite@Home. The company's announcement that it effectively is writing off the content portal half of its business model, less than two years after merging that enterprise with @Home's cable modem network, is about more than weakness in the online advertising market.
It's about credibility, and what it will take for companies like Excite@Home--and the scores of other content and access ventures struggling to overcome bad business plans-to regain the respect and confidence of the investment and business communities.
What will it take? After hearing Excite@Home talk about its prospects, I'm not sure there's a good answer.
Technology analyst and longtime @Home-watcher Leslie Ellis says she stopped understanding @Home the day they merged with Excite. Apparently, the company's executive hierarchy doesn't have a much clearer vision either.
Excite@Home's recent conference call to discuss its earnings and forecast with analysts and journalists was noteworthy in that executives generally seemed to assign blame for the company's failed business strategies elsewhere while giving themselves passing responsibility for spending huge amounts of shareholder dollars to get into businesses with only fleeting value. (Disclosure time: I've owned shares of Excite@Home in my IRA since January, 2000.)
You name it, the problem is out of outgoing CEO George Bell's control: the softening of the online ad market; the failure of competitive DSL that the company earlier was counting on to bring in possibly 8 percent of its new subscribers this year; the decisions by key cable TV affiliates to focus on boosting their cash flow (of all things) instead of spending to boost takeup of new services.
Bottom line? Excite@Home might only finish 2001 with 5.2 million subscribers (you know, the customers who generate about 35 percent of its revenue), rather than the 6 million it was projecting a few months ago.
The company's projections were met by the kind of skepticism that suggests the listening audience, try as it might, was finding less and less reason to believe @Home's management about anything: Its growth projections, the rationale for its strategy, its overall business prospects.
What makes it worse is that the company, for the time being, remains in control of those who plotted the failed strategy of branching out from the boring business of building and operating a unique national broadband network. Since the 1999 merger, Excite@Home has ponied up more than $1.3 billion for content-oriented acquisitions, including payment of $350 million in cash in its $780 million buyout of Blue Mountain.com, primarily a purveyor of free, electronic greeting cards. Now, with this most recent move, they are bailing on the strategy that brought Excite and @Home together in the first place.
We can't say we weren't warned. AT&T execs complained almost from the get-go about the wisdom of diluting the value of a cutting-edge broadband network by tying it to a content developer and aggregator.
But what they couldn't have foreseen was the collateral damage that might come from the continued failure by companies like Excite@Home, not only in developing effective business plans but also in maintaining their credibility when strategy changes became necessary.
We can only hope that the intrinsic value in the broadband side of those businesses is enough to overcome any doubts.
Afterthought: A little clarification is in order. In an earlier column I referred to "the International Engineering Consortium's new SuperNet confab." The Telecommunications Industry Association in fact owns the show. IEC is a prime sponsor of the show, rather than a "partner" as it says on the SuperNet Web site.
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