Juno Online Services (JWEB) is getting on the fast track to offer high-speed Internet access over cable. But the company could run out of steam before the market gets rolling.

Best known for its free Internet access service, Juno announced a deal Wednesday to participate in a broadband high-speed service trial with

Comcast

(CMCSA) - Get Report

, the nation's third-largest cable television system operator.

The deal -- terms of which the companies didn't disclose or even finalize -- is significant for both companies. The trial marks the first time that Comcast, a marketing partner and stockholder of

Excite@Home

(ATHM) - Get Report

, is offering broadband Internet access through an unaffiliated company. And unlike

America Online

(AOL)

and

Time Warner

(TWX)

, Comcast is provisionally opening up its system to Juno in the absence of any governmental pressure.

The End

"We think this makes good business sense. Period. The end," says Steve Burke, president of Comcast's

Comcast Cable

unit. In preparation for the trial, which will take place in the first quarter of 2001 in the Philadelphia area, Comcast is negotiating with other independent ISPs, Burke said, and hopes to announce additional, similar agreements shortly.

The Comcast/Juno deal also represents a potential boost in Juno's plan to convert its 3.7 million active subscribers -- nearly 3 million of whom get Internet access for free -- into paying customers for broadband service. Juno has announced high-speed Net access deals with Time Warner and

AT&T

(T) - Get Report

, the two U.S. cable operators larger than Comcast. It already offers high-speed service over DSL phone lines in partnership with

Covad Communications

(COVD)

, and high-speed wireless Net access with

Metricom

(MCOM)

.

But despite agreements like these, broadband glory is a long way off for Juno. The company has fewer than 2,000 high-speed subscribers already.

And, like countless other Internet companies, Juno is in danger of running out of money before it builds its business up to a sustainable level, in a market where it's extremely difficult for money-losing Internet companies to raise additional capital.

Juno, well off a 52-week high of $87, closed Wednesday at $2.31, down a quarter, or 10%. Comcast's Class A shares rose 62 cents to close at $38.12.

Promises, Promises

Juno finished out the first three quarters of 2000 with $68.6 million in cash on hand, after its operations ran through $97.2 million in cash in the preceding nine months. Although the company has taken steps to limit its cash burn, it will run out of money in about four quarters if it continues spending at its current pace.

Some recent trends associated with Juno's nonpaying Internet subscribers aren't promising. From the second to the third quarter of this year, Juno's cost for providing service to its active free subscribers rose from $1.60 to $1.65 per month, while the revenue associated with each of these subscribers fell from $1.20 to $1.10 per month.

Billable service revenue, meanwhile, rose about 3% from the second to third quarters.

Juno CEO Charles Ardai says the company's continued expansion into broadband won't be hampered by its previously announced cash conservation measures. The company's base of dial-up customers is a "terrific pool" from which to solicit broadband customers, he says; in fact, the costs of upselling a Juno subscriber to broadband service are roughly one-hundredth what it would cost to acquire a broadband customer elsewhere.

Frederick Moran, head of Internet research at

Jefferies & Co.

, says the deal is a positive one for Comcast and other cable operators, as well as for Juno and other Internet service providers. "It shows the beginning of unforced cooperation between two industries that should prove mutually beneficial and help drive penetration of broadband faster and more fully," he says.

Spend Money to Get It

But, he says, the primary issue overhanging Juno's stock is whether it has enough money now, and access to additional capital, to be able to convert its subscriber base to broadband.

"At some point, in order to uncover and unlock growth opportunities, they'd need to spend a lot more money marketing than they're doing," he says. That implies, he says, "either an improved capital market environment, partner funding or an outright takeover."

Moran, whose firm co-managed a secondary offering for Juno this year, rates the firm a hold, Jefferies' third-highest rating. He rates Comcast a buy, his firm's highest rating; Jefferies hasn't done underwriting for that firm.

On Tuesday, Juno filed a registration statement related to a previously announced deal to raise money from the Bermuda-based investment firm

Kingston LP

. Under the transaction, Juno will be able to raise money at a pace it chooses, under certain conditions, by selling stock to Kingston at a 6% discount to its market price. Under the terms of the agreement, though, Kingston isn't obligated to buy these shares unless the purchase price, based on Juno's volume-weighted price, is at least $2.50 per share -- above where Juno closed Wednesday.

It's a positive that Juno can raise money in the current market, Moran says. But, he adds, a drawback is that a deal of this nature can overhang the stock, because there's an ongoing fear of stock coming into the market at any time.