Excite@Home Closing Sites as European Net Outlook Dims

Internet companies with global ambitions are scaling back their expectations.
By George Mannes ,

Excite@Home (ATHM) - Get Report is shedding some operations far from home.

The high-speed Internet access company, which also operates the

Excite

portal in the U.S., said Wednesday it was shutting down portals serving France, Germany and eight other European countries, a move that will cut 85 employees from its staff of 2,500 worldwide.

The move by the

AT&T

(T) - Get Report

-controlled company reflects Excite@Home's ongoing efforts to divest itself of money-losing media operations distinct from its Internet-access-via-cable focus. The news also highlights the challenges that overoptimistic U.S.-based online companies face in their attempts to achieve worldwide domination.

Excite@Home's stock was trading at $4.01 Wednesday afternoon, down 11 cents for the day and down 83% from its 52-week high of $23.

Focusing on Strengths

The company is closing its portal operation in Spain and shutting down sites in France and Germany. It is also shuttering portals operated from Excite@Home's European headquarters in London; those sites are targeted at smaller markets, including Sweden, Switzerland and the Netherlands.

Unaffected by the move will be portal operations in the U.K. and Italy, a broadband Internet access joint venture in the Netherlands, and Excite@Home's portal joint ventures in Japan and Australia.

Excite@Home says it is shutting down the various portal operations because the weak Internet advertising market is throwing off its expectations for the various units' profitability. "While it is disappointing that market conditions make it necessary to discontinue certain European businesses, it is important for us to continue to focus more closely on our strengths," Excite@Home CEO Patti Hart said in a statement.

The company, which Hart joined in April, has

made it clear in recent statements that it is focusing on raising cash and shedding the media operations it now deems noncore. For the first quarter of 2001, Excite@Home reported an operating loss, excluding certain items, of $61.6 million, or 15 cents per share, compared to a loss of $4.6 million, or a penny a share, in the first quarter of 2000. In January, the company had forecast a 13- to 14-cent loss for the first quarter.

Stay Home

Meanwhile, in recent weeks, Internet analysts from

Lehman Brothers

and

Deutsche Banc Alex. Brown

separately pointed out that several U.S. Internet companies, including

Yahoo!

(YHOO)

, face difficulties in expanding operations internationally that are larger than people may have expected.

In an April report subtitled in part "Too Much Too Soon?" Lehman analyst Holly Becker said that among the major Internet stocks she follows, international revenue is forecast to grow over 50% annually over the next five years. "Given our concerns about slowing adoption rates, a shrinking competitive landscape and a lack of resources to drive growth, this will not be easy," she wrote. "We expect volatility, low returns and continued pushed out expectations for years to come."

Those Internet companies in Becker's coverage universe include Yahoo!,

Amazon.com

(AMZN) - Get Report

,

eBay

(EBAY) - Get Report

and

CNet

(CNET) - Get Report

. As evidence of some of the challenges they face, Becker points out that since the first of the year Yahoo! has suffered several high-profile departures from its international team.

Earlier this month, Deutsche Banc analyst Andrea Williams Rice wrote that she expects the European online advertising market will amount to $1.1 billion, compared to the $6 billion she expects for the U.S. "With a greater number of viable competitors, meaningful country-specific costs, and a smaller ad revenue pie, advertising will be a tough way to make a living in Europe," she wrote.

Europe is a "tough market" for other ad-supported Internet companies, says Dylan Brooks, an analyst at

Jupiter Media Metrix

. Excite@Home's move "may mean you're going to see more companies follow suit," he says, "especially if they're not the leader in their market, in particular if they're cash-constrained."

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