AT&T Gains Right to Elect Majority of Excite@Home Board

Updated from 9:08 a.m. EST.

AT&T (T) moved to strengthen its control over Web service provider Excite@Home (ATHM) by gaining the right to elect a majority of the company's board members.

Redwood City, Calif.-based Excite@Home said cable partners Comcast (CMCSK) and Cox Communications (COX) have resigned their seats on the Excite@Home board. AT&T, which owns 58% of Excite@Home's voting stock, now has the right to elect a majority of board members.

Excite@Home also said Wednesday that it has extended its distribution agreements with AT&T, Cox and Comcast.

In addition, Excite@Home said it has canceled plans to offer a tracking stock for its media assets.

New York-based AT&T will consolidate Excite@Home's financial results with its own. AT&T, which Tuesday announced an initial public offering of a tracking stock for its wireless voice and data operations, expects consolidation of the Excite@Home results to cut its 2000 operating share results by 20 cents. Analysts surveyed by First Call/Thomson Financial project 2000 earning of $2.14 per share.

Comcast and Cox have both gained the right to sell their Excite@Home shares to AT&T for at least $48 each. They can sell the shares between Jan. 1, 2001, and June 4, 2004.

Excite@Home shares were up recently 2 1/4, or 7%, to 36 5/8. AT&T was down recently 2 9/16, or 4% at 57 5/16. (Excite@Home shares closed up 3 3/8, or 10%, at 37 11/16. AT&T finished up 13/16, or 1%, at 60 7/16)

Excite@Home said it has extended its distribution deal with AT&T until 2008. That agreement had been set to expire in June 2002. Under the terms of the agreement announced Wednesday, AT&T will feature the Excite@Home portal on its cable Internet service.

A key aspect to the new agreement is the reiteration by AT&T that its exclusive distribution deal with Excite will end in 2002. AT&T's exclusive arrangement with Excite had sparked the so-called "open access" fight, which had other Internet service providers complaining that AT&T, which controls a huge number of broadband cable pipes in the U.S., would prevent those ISPs from using those pipes for distribution.

The exclusivity provisions with both Cox and Comcast are also set to expire in June 2002. Those two companies extended their distribution pacts with Excite@Home until 2006.

The timing of Wednesday's announcement is fortuitous as well. The two companies have appeared to be increasingly at odds in recent months, said Joe Laszlo, analyst at Web research firm Jupiter Communications.

One example was Excite@Home's decision late last year to begin offering free dial-up Internet service, which made it a direct competitor with AT&T's Worldnet ISP. By closing the gap between the two companies, those kinds of missteps should become less likely, Laszlo said. "This answers a lot of those questions," he added.

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