In 1999, the company surprised many investors by merging with Internet portal Excite. The argument was that @Home needed to provide proprietary content to its 450,000 (now more than 1.5 million) cable subscribers. Also, the company argued upon the merger that it could pitch @Home's cable service to Excite's more than 25 million registered users. Thus, the marriage was a perfect fit -- the company said.
If only that proved true. So far, the merger hasn't boosted cable subscriber growth significantly for @Home (the company is matching growth expectations that existed before the merger anyway), nor has the merger measurably lifted Excite to a higher pedestal in the portal world. Instead, the merger seems mainly to have muddied the vision of both companies.
Excite@Home is not a stronger company -- not one with more direction -- than were the two companies when independent. It is too early to judge the merger conclusively, but whatever the ultimate outcome, the merged company has foundered during the past critical year. And it has been a critical year, indeed, because competing high-speed Internet access options, including Digital Subscriber Line (DSL), are rapidly proliferating.
Bear Criticism #1: Lack of Focus and Direction
The past year was a time when Excite@Home should have focused exclusively on landing new customers with a simple message and offer:
"With our service, you can connect to the Internet at superhigh speeds, without using your phone line, and with 'always-on' access. Period. Do you want this service?"
Instead, Excite@Home is focused on launching a business website portal called Work.com, buying BlueMountainArts for nearly a billion dollars, and expanding Excite's online content partly in order to take on Yahoo! These items are the main news that we've heard about from Excite@Home's office. The news that I've wanted to hear, though, is that the company is signing many, many more customers than everyone expected a few years ago, just like America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> did in the past. But we're not hearing that. At all.
Bear Criticism #2: Lack of Focus Resulted in Lost Opportunities
Meanwhile, we are hearing that EarthLink <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ELNK)") else Response.Write("(Nasdaq: ELNK)") end if %> is landing record numbers of high-speed customers by offering a free DSL setup, and we're painfully hearing about AOL's slow (so slow!) but certain high-speed access rollout. Man! AOL basically gave @Home a few years to capture most of the high-speed customers in any market that it served, and yet @Home only attempted to do so halfheartedly! (It did try to make a lot of noise about its Work.com page, however. Yippee!)
Clearly, Excite@Home missed the vital lesson offered by AOL. That lesson was this: Scale as quickly as possible to millions of paying customers; lock those customers into your service; then begin to focus on other revenue streams.
Instead, Excite@Home squandered its lead and now is losing its competitive advantage. The time that the company should have spent focused on landing high-speed converts as quickly as possible before competition emerged was instead lost on a scattered focus and a mixed message.
Here was a company that could have had one of the most powerful marketing messages of any company the past few years, during the Internet "boom," but it forgot to focus on its one competitive advantage: high-speed access. Now this competitive advantage is being erased by emerging, competing services. In fact, many analysts believe that DSL will soon surpass cable access in popularity.
Bear Criticism #3: Lack of Self-Ownership!
My final criticism is largely responsible for the company's lack of focus: AT&T is a majority voting shareholder. This means that Excite@Home is not even free to call its own shots. It has AT&T to answer to, and it has AT&T willing it into decisions. This should be very disheartening to Excite@Home investors.
Although you own Excite@Home and you may understand what you think its management wants to do, you cannot know what AT&T is planning for Excite@Home behind closed doors. Most likely, even Excite@Home doesn't know AT&T's ultimate plan for the company! This makes it very difficult to understand -- and therefore believe in -- your company. As a shareholder, you should feel slighted and underinformed about what you own. As a shareholder, your Excite@Home investment is ultimately at the whim of AT&T management. If I want that, I'll buy AT&T.
Sorry, Excite@Home. You were exciting once. What you evolved into is currently discouraging.
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