BREAKFAST WITH THE FOOL
Monday, November 22, 1999
"This report, by its very length, defends itself against the risk of being read."
-- Winston Churchill
Excite@Home Creating Tracking Stock By
Richard McCaffery (TMF Gibson)
High-speed Internet access provider and Web portal Excite@Home <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATHM)") else Response.Write("(Nasdaq: ATHM)") end if %> plans to issue a tracking stock for its media assets, a move intended to eliminate confusion and help the company move faster in the hectic Internet world. The common stock, which will be distributed to all shareholders on a tax-free basis, will track the economic performance of the media business. A separate board is being formed, composed of a majority of independent directors and a minority of the company's cable and telecommunications owners, which includes firms like AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %>, Cox Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COX)") else Response.Write("(NYSE: COX)") end if %>, and Comcast <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMCSK)") else Response.Write("(Nasdaq: CMCSK)") end if %>.
The plan, expected to be completed in the third quarter of next year, will separate Excite, the Web portal portion of the business, from @Home, the subscription service that offers high-speed Internet access via cable lines to about 1 million homes.
The two companies merged last January in a stock deal valued at about $6.7 billion. The move teamed a content provider with a company that offered a fast connection platform, which seemed to be an ideal vertical partnership.
But political problems developed surrounding access to cable lines for Internet service providers. By virtue of its ownership, Excite@Home has exclusive access to many of the country's cable lines. ISPs such as America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> are looking to gain access to these lines to provide a competitive service. This battle is being played out in courts throughout the United States. Creating a tracking stock doesn't solve the problem -- it wasn't intended to -- but it should help provide some distance between the content and highly charged access sides of the business.
Excite@Home's stock has tumbled since spring, from a high of $99 to $51 5/16 as of Friday's close.
News to Go
Networking equipment manufacturer Cabletron Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CS)") else Response.Write("(NYSE: CS)") end if %> has agreed to sell its FlowPoint subsidiary for about $861 million in stock to Efficient Networks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EFNT)") else Response.Write("(Nasdaq: EFNT)") end if %>, and form an alliance with the company to fully penetrate the digital subscriber line business. Under the deal, Cabletron will become Efficient's largest shareholder.
Local telephone operating company SBC Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SBC)") else Response.Write("(NYSE: SBC)") end if %> and Internet service provider Prodigy <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PRGY)") else Response.Write("(Nasdaq: PRGY)") end if %> have reached agreement to pool their consumer and small business operations. Under the deal, Prodigy will manage ISP operations for SBC's current dial-up customer base of 650,000, and SBC will take a 43% ownership stake in Prodigy.
High-end computer and server manufacturer Silicon Graphics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGI)") else Response.Write("(NYSE: SGI)") end if %> is reportedly in talks to sell its Cray Research division to a technology group called Gores Technology, Reuters reported.
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