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Comcast, Cox to End @Home Service

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TIMES STAFF WRITER

Bad news continued to mount Friday for cash-strapped Excite@Home Corp., as two key cable partners said they will stop selling the company’s high-speed Internet service by June.

The move by Cox Communications Inc. and Comcast Corp. is another in a string of blows to Excite@Home, which has been teetering on the brink of bankruptcy for much of the summer. Doubts grew Friday about whether Excite@Home could survive, because the company is loaded with debt and losses at the ad-starved Excite Internet portal have more than offset revenue from its @Home cable-access business.

Said one cable industry source: “The company is dead. It’s a meltdown that they can’t stop now.”

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Acknowledging the dire condition, Excite@Home executives said the company will hire an investment banking firm to help evaluate options “as soon as it’s possible.”

Together, Cox and Comcast account for more than one-third of Excite@Home’s total customer base of 3.7 million households. The company’s largest customer is AT&T; Broadband, a major owner of Excite@Home that has 1.3 million of its high-speed Internet customers using the service. All three have pledged to maintain uninterrupted service to customers.

Meanwhile, the troubled firm got a small reprieve from New York-based Promethean Investment Group, which had demanded repayment of its $50-million investment by the end of Friday. Late in the day, Promethean issued a statement saying it had taken no action regarding the $50 million in convertible notes.

“@Home has taken concrete steps that may form the foundation for potentially constructive solutions to resolve the breach of terms of the notes,” Promethean said.

Promethean is one of two last-resort lenders who stepped in to provide a combined $100 million in funding for the Redwood City, Calif.-based firm.

Although Promethean did not take action late Friday, the firm said it will monitor the situation closely “to determine what actions may be necessary to protect its rights.”

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An industry source said Friday that the other lender, Angelo, Gordon & Co., a hedge fund based in New York, also had sought repayment of its $50-million investment in Excite@Home. The status of that demand was unclear.

Both lenders said the company misrepresented its financial condition when they invested in June. Excite@Home executives have denied the allegation and have said repaying the $50 million to Promethean would force the company into bankruptcy.

The company had about $1 billion in debt June 30 and $162.3 million in cash and short-term investments. Shares of Excite@Home, formally known as At Home Corp., closed down 10 cents to 42 cents a share Friday on Nasdaq. The share price has fallen more than 99% since @Home bought the Excite Web portal in 1999.

Analysts who follow the Internet company were not optimistic about its prospects.

“If Cox and Comcast went ahead and signed up an alternate provider . . . in my view, it would make it difficult for them to go into bankruptcy and emerge again,” said Drake Johnstone, an analysts with Davenport & Co. in Richmond, Va. “I’m not optimistic that they will” survive.

The financial outlook looks even worse now that two of its largest cable customers--Cox and Comcast--have said they intend to exercise their right to end their agreements with Excite@Home when they expire June 4.

“We want this to be a Cox-managed network,” Cox spokeswoman Laura Oberhelman said. “We will have a greater amount of control over our network and assume a lot of the responsibilities that sit with Excite@Home.”

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Steve Burke, president of Comcast Cable, said exercising the exit provision was in the best interest of customers and shareholders in light of reports of Excite@Home’s financial condition.

Both Comcast and Cox also are in discussions with Excite@Home about forming more limited agreements.

“That being said, we will have 950,000 customers by year-end, and we need to ensure that they continue to be well-served,” Burke said.

Excite@Home downplayed the cable companies’ moves, saying that a new agreement has not yet been ruled out. “We’re optimistic. There’s still interest in both sides . . . and we both have a lot to gain in maintaining the relationship,” Excite@Home spokeswoman Stephanie Xavier said.

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Associated Press and Bloomberg News were used in compiling this report.

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