The portal-consolidation game got under way this morning with
plan to acquire the Internet search and portal company
in an all-stock deal worth $6.7 billion at current prices.
The companies say they hope to accelerate the development of high-speed, or broadband, access to the Internet by combining Excite's all-purpose content with @Home's delivery of high-speed Internet access through cable television systems.
In an early-morning telephone interview, Excite CEO George Bell gave three reasons for combining the two companies, leading off with the importance of broadband access. "Broadband is going to win," he said, explaining that consumers will inevitably move from telephone dial-up access to the Internet to quicker, more immediate access that's always on.
"@Home has developed a powerhouse lineup of partners," Bell said. The service, which currently has 330,000 subscribers, has distribution agreements with its largest shareholder,
, and other cable companies that could put it into nearly 60 million homes worldwide.
The final reason Bell gave for the deal was e-commerce, a subject that's generated excitement among both online businesses and investors in the Internet. The missing element of Excite's current ventures in e-commerce, he said, is a "billing relationship" with Internet users. In other words, Excite isn't in a situation in which customers are paying a monthly bill to the company, and would find it easy to send a little extra in a given month to pay for merchandise purchased over the Net. The @Home deal changes that, Bell said. Following
pending acquisition of TCI, the merged @Home and Excite will have potential billing relationships in two-thirds of American households.
The Excite-@Home deal has the potential to significantly alter the balance of power in the online world. It gives Excite, which is seen as lagging in the portal wars, new ammunition against
. The deal also means that
, which already gives its customers online content combined with the means to connect to that content, will have a new competitor as it seeks to deliver high-speed access to its users. Bell said that the merged @Home and Excite would have a unique ability to combine narrowband personalization its users enjoy with high-speed access. "Neither
AOL nor Yahoo! can offer what I've said," he said.
The announced @Home-Excite deal terms offers a hefty premium to Excite shareholders as of Friday's close. @Home will issue 1.041902 share for each Excite share. On Friday, Excite closed at 67 1/2, up 2 3/8, and @Home closed at 102, down 5/8. Excite has a 52-week high of 95.