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Loss of e-mail provider may push Cox to 'Plan B'

August 24, 2001

Cox Interactive soon could lose its Internet business partner, leaving thousands of customers in need of a new e-mail provider.

Word that Excite@Home is on the verge of collapse means Cox officials may need a new content provider and e-mail host for its Cox@Home and Cox@Work services.

Cox holds an exclusive contract with Excite@Home through 2001, a nonexclusive contract through 2006, as well as $64.4 million in Excite@Home stock.

But so far, the company has kept mum about backup plans to replace Excite@Home.

"We remain absolutely committed to our partner and, more importantly, to our customers for uninterrupted service," said spokeswoman Laura Oberhelman with Cox Interactive in Atlanta. She would not reveal if the communications giant has begun to look for another content provider and e-mail host.

"There are always backup plans in the works," Oberhelman said. "We've been following their financial situation for some time."

Excite@Home, which provides home-page content and e-mail for cable companies' Internet subscribers, filed an annual report with the U.S. Securities & Exchange Commission on Aug. 20 revealing heavy debt and a statement of "substantial doubt" in its future from auditors.

Excite@Home officials said Wednesday they had fired their auditors, Ernst & Young LLP.

Excite@Home lost $350 million in the past quarter, holds nearly $1 billion in debt and faces a delisting from the Nasdaq National Market exchange. A delisting could require the company to repay a $100 million bridge loan from two capital firms, which some speculate will nail the coffin closed.

Excite@Home stock has been trading below $1 since July, and closed at 40 cents Aug. 21, the day after filing with the SEC. It was trading at 49 cents as of press deadline Aug. 22.

Some industry watchers have speculated that Excite stakeholder AT&T Corp. will purchase the business and continue @Home services.

But with several media outlets already reporting the demise of Excite@Home, Cox officials may have to take quick action.

The company would not disclose how many Cox@Home and Cox@Work users there are in metropolitan Phoenix, but said nationwide, the number of subscribers tops 484,000.

Regardless of who fills the slot, Cox holds 29.1 million shares of Excite@Home stock, worth $64.4 million, according to its latest quarterly report filed with the SEC.

In January, Cox exercised a right to trade some Excite@Home shares for 75 million shares of AT&T common stock. That move gave Cox a $307.4 million gain but ends its right to trade any more shares of Excite@Home for AT&T stock.

Uncertainty about the future of Excite@Home also raises questions for those relying on its e-mail service.

The e-mail portion of Cox@Home and Cox@Work already has been troublesome for many subscribers. It often does not download new messages or is down for days for some users.

Cox officials repeatedly have said they are not aware of any troubles with Excite's e-mail service.

One of Cox@Home's beta customers in north Phoenix, Anthony Helmstetter, said the service originally was "impeccable" but "has been a progressive steady decay of service, yet the bills keep rising.

"E-mail still is not reliable enough for anyone doing any business from home," said Helmstetter, who is chief executive of "Their mail server was down 15 minutes this morning."

Helmstetter said he's not too worried about the potential loss of Cox's partnership with Excite@Home because "it has not been a good product," and he has multiple e-mail accounts with other providers.

Another Cox@Home subscriber, Kathee Runo, of Chandler, said her e-mail service has been down periodically.

"One big negative about most of these ISP/cable companies is they supposedly guarantee Internet connection," Runo said. One Cox representative told her "e-mail was a bonus that you get with the Internet connection," she said.

Runo added it would be an inconvenience if she couldn't access her Cox

@Home e-mail, but it's "certainly not the end of the world."

Like Helmstetter, she has backup e-mail accounts.


by Tara Teichgraeber, Copyright © 2001 American City Business Journals Inc.


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