OCTOBER 5, 2000
SPECIAL REPORT--THE NET'S FUTURE
It's Not Easy Being a Net Pioneer -- Just Ask George Bell | Excite@Home's boss has ridden the cyber coaster up and down. Now he's trying to start over and build the portal Excite was always supposed to be
| When George Bell walks into his local Starbucks in the Boston suburb of Chestnut Hill, the 43-year-old CEO and chairman of broadband cable service provider Excite@Home (ATHM) looks like he climbed out of an Eddie Bauer catalog in his Polarfleece vest and long-sleeve plaid shirt. He's tanned and well-rested, but somehow obsessed. Only one thought is on his mind today: Content.
"My heart's in content," says Bell, who began his career as a documentary filmmaker. "What I'm hopeful about in the next year or so is that I can spend more time refocusing my energies on content again. And how content, marketing, and sales come together for both narrowband [dial-up Net access] and broadband."
For Bell, content is paramount, and for a good reason: Excite@Home is in trouble. These days, profits have replaced "business models" as the raison d'etre of the Internet. And at Excite@Home, profits couldn't be more elusive. In the first six months of this year, the company's losses increased nearly six-fold over the same period in 1999 -- to $1.3 billion worth of red ink on sales that tripled to $286.8 million. If that keeps up, Bell risks losing the confidence of his corporate parents at AT&T, which has a 25% stake in the company and a 74% voting interest.
BLEAK APPRAISAL. So Bell has gone back to square one. His plan is to finally concentrate on the job he began five years ago: turning Excite.com into a rival of Yahoo! and America Online. That's a tall order, and the odds are stacked against him. Even he admits as much. "From a point of view of reach," he says, "Excite is no longer a strong portal."
One of traditional media's first defectors to the Web, Bell now epitomizes the struggle of many Net entrepreneurs to squeeze sawbucks out of cyberspace -- and hold on to their jobs. A star of the Net's early days, he once inspired a raft of Silicon Valley entrepreneurs a generation younger than himself. In 1996, he left a cushy junior-management position at Times Mirror Magazines, where he ran seven outdoor-sports titles and their related Web sites, to become CEO of the portal Excite. Then in 1999, in the biggest Web deal at the time, he merged his company with high-speed access provider @Home Network in a stock swap worth $7 billion and became president of Excite@Home.
Today, Bell is still struggling to exploit Excite@Home's main competitive advantage: its lead in providing high-speed Net access services. Most analysts expect the company to grow exponentially as the U.S. market for high-speed services zooms from an estimated 2.2 million subscribers at the end of 1999 to 15.3 million in 2003. Excite@Home, which has 2 million subscribers, missed second-quarter subscriber-growth estimates. But Bell still predicts 3 million subscribers by the end of 2000, 6 million by 2001, and 10 million by 2002.
SMELL THE COFFEE. The reason broadband looks so lucrative is that it allows Net surfers to use multiple applications at the same time while giving them rich video and audio not possible via standard phone hookups. Broadband access would let you watch, say, a full-screen music video without the choppiness and out-of-sync sound that plagues dial-up services. AOL and Yahoo! are both lagging far behind in broadband, at least for the moment. Excite@Home's lead in that area is the main reason most analysts have buy recommendations on its stock.
As Bell settles back in one of the Starbucks' overstuffed leather chairs, he smiles with an ease and confidence rarely seen since he became Exite@Home CEO last January. "In the past two days, I've spent hours reviewing our music strategy, our instant-messaging strategy, and the direction we're going with the Start page from both a personalization and nonpersonalization perspective," he says. "That's more time with our product groups than I've spent in the past two years."
By definition, he says, his position as CEO, together with the job of chairman he assumed in March, has required him to deal more with governance, dealmaking, and the company's all-important cable relationships. This has left precious little time for him to devote to the Excite portal. So, on Sept. 19, Bell announced he would remain chairman at least until the end of 2001. But the hunt was on for a new CEO to whom he could cede the reins of the company's day-to-day operations.
AT&T'S LOOMING SHADOW. The company's difficulties date to the big merger two years ago, which put Bell at the forefront of building a new industry. Problems started when AT&T's purchase of cable company TCI -- @Home's majority shareholder at the time -- was approved. The telecommunications giant was being challenged to open its cable networks to third-party Net-access providers, which would render worthless Excite@Home's exclusive contracts with every major cable provider except Time Warner. In any case, Excite@Home's contracts expire in less than three years.
The Excite@Home merger, meanwhile, has yet to show any real benefits. Excite@Home's stock price has plunged from $100 a share to a 52-week low on Oct. 4 before gaining slightly to close that day at $12.25. Bell, who has seen the company move from loss to profitability and back to loss, is now left with nothing more than a second-tier portal and a broadband-service company mired in the corporate muck of AT&T -- and with the soon-to-be-merged AOL and Time Warner about ready to start nipping at its heels.
Bell delicately steers clear of blaming AT&T, or any possible interference by its managers, for his company's problems. "The inference has been that AT&T is controlling the company, but 95% of my communication with [AT&T Chairman] Michael Armstrong is initiated from me. He doesn't micromanage what we do, Most of what we do is relatively new to him. I have not sensed that there's this stifling or creeping sense that [AT&T] thinks they can connect the strings, and I'll dance to their tune. They have a lot of things on their own plate, and they see all the reasons in the world to grow their broadband business as fast as possible."
STAMPEDE FOR THE DOOR. Brave talk. But nearly every member of the company's first-generation management team has already bailed out. Tom Jermoluk, the original Excite@Home CEO and chairman, passed his chief-executive crown to Bell 10 months ago before leaving the company two months later. Richard Gingras, senior vice-president and general manager of Excite Studios; Jonathan Rosenberg, senior vice-president for online products; and David Bagshaw, senior vice-president for customer care, all said in September that they also plan to leave.
Earlier this year, Chief Financial Officer Ken Goldman resigned, followed soon after by Senior Vice-President for Marketing Fred Siegel. Excite co-founder Joe Kraus is on an "extended sabbatical," and Adam Grosser, formerly president of subscriber networks, stepped down in July, along with General Counsel David Pine.
Bell says he isn't going anywhere anytime soon. "It isn't in my nature to start something and not finish it," he says, estimating that it will take five months to six months to find a new CEO. "I won't be out of this job for awhile, and I'm perfectly fine with that," he says.
But there's a slight air of bravado to such assertions. Perhaps Bell is trying to instill investor confidence and rekindle some enthusiasm in his company by insisting he's there for the duration. Or maybe he's just trying very, very hard to finish what he started.
By Stefani Eads in New York
Edited by Thane Peterson
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Copyright 2000, by The McGraw-Hill Companies Inc. All rights reserved.
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