Content-Access Convergence Comes Home to Roost with Excite Deal

After years of being little more than a buzzword, 'convergence' may finally be coming into its own.
Author:
Publish date:

SAN FRANCISCO -- Maybe this convergence thing could catch on after all.

The buzzword has been around so long it's decayed into a sort of white noise. Conferences have been devoted to it, CEOs have draped florid keynote speeches around it, companies have speckled their PR releases with it. Yet convergence has been more than fashionably late to the Internet bash.

Increasingly, signs are emerging that Internet lines and Internet content are indeed converging, with

@Home's

(ATHM) - Get Report

proposed acquisition of

Excite

(XCIT)

for $6.7 billion the latest and perhaps the most persuasive sign.

The deal serves to remind that this medium is changing so fast that sitting still will be a bonafide ticket to the back row. It also underscores how important broadband access may be in the success of a portal such as Excite or in putting a user-friendly front end on high-bandwidth Internet access providers such as @Home.

Since June, the Internet hubs that have come to be known as portals have been racing to get close to a big company with deep pockets. Most that did found willing partners in media giants that -- despite great, lumbering strides -- missed the Internet bus.

Disney

(DIS) - Get Report

bought 43%

Infoseek

(SEEK)

, and

NBC

bought 19% of

CNet's

(CNET) - Get Report

Snap

-- deals brought old media marketing expertise to new media's potential. Late last year,

America Online

(AOL)

bought

Netscape

(NSCP)

, bringing together two of the biggest names in the Internet world.

The @Home-Excite deal differs from the others because it links a company centered on Internet media with one devoted to high-power infrastructure in a crossbreeding that may prove more fruitful than media inbreeding. And it comes as companies are focusing attention on the capacity of their networks, says Emmy Sobieski, a tech analyst and portfolio manager for

Nicholas-Applegate

, which owns AOL, @Home and Excite. Three years from now, 20% of the Internet will be on broadband access, Sobieski estimates.

Yahoo!

(YHOO)

is working on Turbo Yahoo!, a high-bandwidth network that won't be a service in itself but will let Yahoo! add more sophisticated functions, CEO Tim Koogle told

TSC

last week. AOL this summer will start offering

Bell Atlantic's

(BEL)

high-speed digital subscriber line access as an option for AOL members in Bell Atlantic's service area. And today

Snap

said today it will launch Cyclone sometime this quarter to showcase rich media, including video, audio, gaming and telephony.

Right now, the union of @Home and Excite vaults the companies to the lead in this race. "@Home is in the driver's seat in the broadband market," says Michael Wallace, an analyst at

Warburg Dillon Read

, which has no underwriting relationship with either company. "That is what Yahoo and AOL are both trying to do. This

merger takes Excite to the front of the pack."

Wallace estimates @Home's installed base at a couple hundred thousand, but notes there are more than 60 million cable users. "It's not a question of if, but when," he says. "In the next five years, we'll probably reach critical mass."

The wake of the Excite/@Home news stirred up speculation over the next big Internet deal. But most big-time media companies have already made their Internet deals, and most of the big Internet players are already spoken for. Yahoo, with its $30 billion market cap, stands alone, although

Softbank

holds a minority stake. (

Editor's note: Softbank is a minority shareholder in TheStreet.com

.) That leaves

Lycos

(LCOS)

on the Internet side and

Time Warner's

(TWX)

RoadRunner on the broadband side, along with regional phone companies that offer DSL services.

In an informal

poll of

TSC

readers today, Lycos was voted most likely to be acquired next. "Lycos is starting to look like the last girl at the dance," says Mark Mooradian, senior analyst at

Jupiter Communications

. "Somebody is going to have to pay very richly for them."

Staff reporter George Mannes contributed to this story.