December 14, 2001 1:10 PM PST
Excite@Home slashes 400 jobs
Redwood City, Calif.-based Excite@Home said in a statement Friday afternoon that the layoffs were "in line with the company's intention to conserve cash and to work to return value to its financial stakeholders."
Excite@Home, which in late September filed for Chapter 11 bankruptcy protection, is in the middle of a fierce battle between bondholders and cable companies. The bondholders want to wring out as much cash as possible from their investment, while Excite@Home's cable partners--including Cox Communications, Comcast and others--plan to assume the assets of the foundering company.
Excite@Home's cable partners signed contracts worth $355 million in early December that guarantee service for more than three million customers until late February. The contracts require Excite@Home to provide cable modem service and help the cable companies build their own networks as quickly as possible. When the customers are transferred from the @Home network to independent networks run by the cable companies, the company will shut down.
Only two weeks ago, Excite@Home had 4.1 million customers and controlled the network for 45 percent of Americans with residential broadband Internet access. But on Nov. 30, bankruptcy court Judge Thomas Carlson ruled that Excite@Home could renegotiate contracts with its cable partners--a move that the cable partners warned could result in termination of agreements.
Only hours after the original contracts expired at midnight on Nov. 30, negotiations between Excite@Home and AT&T broke down. AT&T, which controls a 79 percent voting interest in Excite@Home, pulled its 850,000 customers from the @Home network and began switching them to the AT&T Broadband Internet network. AT&T subscribers temporarily lost their connections, and many still suffer with slow connections, disrupted service or e-mail problems.
Days later, AT&T withdrew its $307 million bid for the company's assets. That move prompted Excite@Home to distribute its assets among cable partners and decide to wind down operations by Feb. 28.
Attorneys estimate that Excite@Home will spend $150 million over the next three months to maintain service to customers, based on the size of its operations. That would leave an estimated $205 million for creditors and bondholders. The company also has roughly $200 million in cash.
Roughly 900 employees who remain at Excite@Home will help in a transition phase, mainly preparing its assets and services to be handed over to cable partners. The remaining pool of workers will likely shrink continually between now and Feb. 28, according to the news release.