At Home Corporation
At Home Corporation
Sales: $616.37 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: ATHM
NAIC: 541519 Other Computer Related Services; 514191 On-Line Information Services; 51121 Software Publishers
At Home Corporation, doing business as [email protected], is the leading broadband Internet service provider (ISP) as well as the fifth largest paid ISP in the United States. The company is the result of the January 1999 merger between Excite, Inc. and @Home Network, at the time the largest Internet-related merger ever. The Redwood City, California-based company boasts more than three million subscribers, annual revenues surpassing $600 million, and numerous subsidiaries, affiliates, and partners. In mid-2001 telecommunications powerhouse AT&T Corp. still retained a 74 percent voting stake and 23 percent equity interest in At Home, which was showing signs of financial weakness.
At Home Network: 1995-98
In May 1995, The At Home Network (@Home) was founded by TCI International Inc., with funds from venture capital giant Kleiner Perkins, in order to grow its Internet business. The company’s founding CEO was William Randolph Hearst III, former editor of the San Francisco Examiner and grandson of the famous media baron. The following year, Comcast Corporation and Cox Communications Inc. also assumed stakes in the company.
@Home quickly became successful by providing interactive services to homes and businesses through its own network architecture, as well as through a myriad of transport options, including telecom circuits and the cable industry’s hybrid-fiber coaxial (HFC) infrastructure. Essentially, the company created a parallel Internet of its own. The cable connection provided users with significant speed increases over conventional dial-up Internet access, and the company’s national, multi-megabit backbone allowed for unique content offerings that went far beyond then contemporary web experiences. @Home was not simply a connection to the already overloaded Internet. Instead, @Home used advanced network technology to enable connections up to a hundred times faster than traditional telephone modems. In addition, The @Home Network provided a high level of network management and customer support, complemented by multimedia content tailored to the network’s high bandwidth capabilities. The @Home Network was well differentiated from other Internet connectivity solutions by its highspeed, performance-engineered network, and its full-featured service offerings.
Early in 1996, Hearst stepped up to become vice-chairman of the company and @Home brought in former Silicon Graphics Chief Operating Officer Thomas Jermoluk as its new CEO. In April 1997, Canada’s top two cable providers, Rogers Communications Inc. and Shaw Communications Inc., became partners in the venture, and the company announced a Canadian-based cable modem service. The following month, after spending in excess of $38 million since its inception to develop its services, At Home filed to go public. The initial public offering occurred in July, and the company sold nine million shares and raised $94.5 million.
By January 1998, @Home boasted 50,000 subscribers, a number which would double by April. During that year, @Home partnered with U.K.-based telecom operator ComTel Ltd. to create a British @Home service; with Intel Corporation to announce a Netherlands-based cable modem service; with Sumitomo Group for a Japan-based service; and with Cable & Wireless Optus Limited for an Australia-based service. Also in 1998, the company built a new corporate campus. In June of that year, the company went retail and held a North American shopping mall tour to promote the company and its services.
Excite Inc.: 1993-98
Excite Inc. was founded, according to it own company history, by “six burrito-loving Stanford grads sitting in a garage on Lockwood Drive in Cupertino, CA. It was their penchant for cheap Mexican cuisine that set the stage for the idea that ultimately led to the creation of Architext Software,” later incorporated into Excite, Inc. as Excite Search. For as the six founders—Mark Van Haren, Ryan Mclntyre, Ben Lutch, Joe Kraus, Graham Spencer, and Martin Reinfried—sat in Rosita’s Taqueria in Redwood City on the evening of February 28, 1993, the idea came to them: Create a software tool to manage the vast amount of information available on the Internet. “We knew that we didn’t want to work for any big company,” explained then president Kraus to Red Herring magazine in early 1995. “We wanted to work together and do something entrepreneurial.” The five computer programmers and one political science major set off at once for the Stanford library to research the best way in which to fill the information search-and-retrieval void. While simultaneously holding down income-producing jobs, the five programmers agreed upon their plan of attack, got busy at their Sun workstations, “and the political science major—Joe Kraus—cut off several inches of hair and became ‘Phone Boy.’”
Armed with a software product and business named Architext that combined search-and-retrieval with automatic hypertext linking, subject-grouping, and automatic abstracting, Phone Boy began calling all up and down Sand Hill Road, the haven of West Coast venture capital firms. Response was initially negative. Architext even received a letter of rejection from a company to whom they had never sent a proposal! It was not until more than a year and a half after the landmark evening in Rosita’s, in December 1994, that the entrepreneurs would hit paydirt. It arrived in the form of venture capital giant Kleiner Perkins Caulfield & Byers (KPCB), along with Institutional Venture Partners. Chief supporter Vinod Khosla of KPCB even provided the fledgling company with a badly needed $4,000 hard disk drive. “We just met the man and he bought us a hard drive. That went a long way,” explained Kraus. And thus it began—the guys were off into the world of business plans, contracts, and the reality of turning over increasing amounts of control to their benefactors.
In October 1995, Architext launched the Excite suite of services at www.excite.com, and the company gained momentum quickly. Exclusive distribution agreements were signed with Microsoft Network and Netscape. The company officially changed its name to Excite, Inc., and went public in April 1996 with an initial public offering of two million shares at $17 per share. By the time the dust cleared that month, the company had grown to 65 employees, was housed in a 19,000-square-foot office in Mountain View, California, and had hired veteran media mogul George Bell to be its CEO. Architext had blossomed into a serious technology concern, with business cards, letterhead, and bottles of Odwalla-brand juice seemingly everywhere.
In 1996, Excite experienced a number of milestones. The company grew from 13 advertisers under contract at the end of January to some 370 by the end of the year. Revenues soared from $145,000 to over $14 million. In addition, experienced senior-level management, from an incredible list of established companies, was now in place. In addition, the company acquired two search-and-navigation competitors, Magellan and WebCrawler. Excite also launched its first national advertising campaign to the sound of Jimi Hendrix’s “Are You Experienced?” and introduced several new products, including Excite City.Net, Excite Live!, ExciteSeeing Tours, and Excite NewsTracker, as well as Excite 2.0, an updated version of its original product.
The following year also witnessed some major events for the company as well. Two were nearly simultaneous: the early April consolidation and move to a new 88,000-square-foot facility in Redwood City, California—right down the street from the original birthplace of the company, Rosita’s—and the launch of Excite 3.0, which featured Excite Channels, formerly code-named “Purple Haze.” Excite’s employees numbered around 200, and the Odwalla intake soared to some 2,000 bottles per month.
[email protected]: 1999
In January 1999, The @Home Network announced a merger with Excite, Inc. By April, @Home boasted 500,000 subscribers and announced a Japan-based cable modem joint venture service. By the time the $7.2 billion deal closed in May 1999, At Home Corporation represented the largest-ever Internet merger. The combined company became the self-proclaimed “leader in broadband focused on the global deployment of consumer and commercial broadband services.” With stars in its corporate eyes, @Home built a new Internet backbone with the capacity to hold five million users.
[email protected]’s drive to be the best broadband online service provider in the world centers on combining compelling online content, personalization, and tight navigational services with the distribution power of its extensive broadband infrastructure. The Company’s goal is to continue to provide suites of advanced interactive services that capture the imagination, deliver the sheer power of the Internet, and reinforce their commitment to their customers.
The company grew by leaps and bounds following the merger. In May, the Netherlands-based @Home service finally opened for business, followed by announcements for Australia-based and Germany-based joint venture services in June and September, respectively. By the end of 1999, the combined company, now operating as [email protected], touted one million cable modem subscribers worldwide. Excite CEO George Bell came aboard the new company as president, and its holdings included the Enliven Business Unit (formed in 1996) and MatchLogic Inc. (a targeted marketing services company, also formed in 1996).
AT&T Corp. gained a stake in the company when it acquired TCI in 1999. The acquisition was important to the telecommunications giant because it now had a foothold in direct-home cable conduits, which was further expanded when AT&T acquired MediaOne Internet Services, making AT&T the largest cable provider in the United States. AT&T rattled its saber in the sheath, making noises about splitting up [email protected], but partner Cox Communications nixed the idea.
Instead, the company continued to make acquisitions, purchasing Full Force Systems Inc. for approximately $1.7 million in cash and stock and online advertising firm Narrative Communications Corp. for $93.8 million in stock in December 1998. The company acquired e-commerce firm iMall Inc., for $425 million in stock, and Webshots Corporation, for 2.1 million shares of stock in October 1999. Two months later the company acquired, for $780 million in cash and stock, Bluemountain.com, the online branch of greeting card phenomenon Blue Mountain Arts Inc.
Jermoluk moved up to chairman in early 2000, giving up the CEO position to Bell, who eventually also became chairman. In February of that year, the company acquired Kendara Inc. for 1.5 million shares of stock. In April 2000, the company expanded into digital subscriber line (DSL) services, adding nearly 15.3 million households to its broadband footprint. The following month, Excite @Home featured 1.5 million broadband subscribers, had 123 million Excite pages viewed, had 21 cable affiliate relationships and one DSL relationship, and passed 87 million homes with its cables. The company also entered into a joint venture with Dow Jones & Company to create Work.com, Inc., a business portal.
Also during that year, the company extended its distribution agreements with cable partners AT&T, Cox, and Comcast and had reached affiliate agreements with numerous other cable companies across North America, including Cablevision Systems, Century Communications, Charter Communications, Cogeco Cable, Garden State Cable, Insight Communications, InterMedia Partners, Jones Intercable, Midcontinent Cable, Prime Cable, Rogers Cablesystems, Shaw Communications, Suburban, and Videon CableSystems. As AT&T leveraged to expand its voting stake in the company, Cox and Comcast agreed to give up their board seats and their veto rights, leaving AT&T with a controlling stake in the company. Also in 2000, the company announced plans to combine its international operations with Chello, a broadband ISP controlled by United Pan-Europe Communications.
Following on the heels of a third quarter 2000 loss of $668.7 million, Bell announced his decision to step down as CEO as soon as a successor could be found, but would remain chairman at least through 2001. The future of the company was further clouded by late August 2001, when reports surfaced that both Cox and Comcast planned to terminate their distribution agreements with At Home, effective June 2002. By this time the company was clearly showing signs of financial strain, and shares of its stock were trading at a mere $0.40.
At Home Network Solutions, Inc. (46%); At Home Network Australia Pty Ltd. (50%); At Home Japan Limited (43%); Blue-mountain.com; Excite Asia Pacific Pty Ltd. (50%); Excite Canada (50%); Excite Espana (Spain); Excite Italia (Italy; 50%); Excite Japan (50%); Excite UK Limited (50%); Full Force; iMall; MatchLogic; Narrative; Webshots; Work.com, Inc.
AOL Time Warner Inc.; Microsoft Corporation; Adelphia Communications Corp.; AltaVista Company; Yahoo! Inc.; Covad Communications Group; Disney Internet; EarthLink, Inc.; High Speed Access; Hughes Electronics Corporation; Me-diacom Communications; Prodigy Communications Corporation; PSINet; SBC Communications Inc.; SoftNet; UUNET; Verizon Communications Inc.; WorldCom, Inc.
- Excite, Inc. is founded as Architext.
- @Home Network is founded.
- Architext changes its name to Excite, Inc., and goes public in April 1996 with an initial public offering of two million shares at $17 per share.
- @Home is taken public in July.
- Some 500,000 households now subscribe to the @Home service; @Home and Excite merge to form At Home Corporation, doing business as [email protected] Home.
- At Home faces liquidity problems, low stock price levels, and the pending termination of agreements with Cox Communications and Comcast Cable.
Alpert, Bill, “Relaxing @Home: A Cable-Modem Company Fixes Its Y2002 Problem,” Barron’s, April 3, 2000, p. 14.
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“AT&T Reaffirms Its Commitment to [email protected] As Cable ISP,” Telecommunications Reports, August 16, 1999, p. 17.
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—Daryl F. Mallett