Add Technology – AP to My Yahoo!

By MICHAEL LIEDTKE, AP Business Writer

SAN FRANCISCO – Yahoo! Inc (NasdaqNM: YHOO -news ). on Monday snapped up Overture Services Inc. (NasdaqNM: OVER -news ), the pioneer of pay-for-placement online search results, in a $1.6 billion deal that fortifies the Internet powerhouse for a looming showdown with Google and Microsoft.

The cash-and-stock acquisition valued Overture at $24.82 per share — a 15 percent premium over the stock’s closing price last week. The price consists of $312 million in cash and 0.6108 Yahoo shares for each of Overture’s 65.7 million outstanding shares.

The deal’s value will fluctuate with Yahoo’s stock until its expected closing date in the fourth quarter.

Overture’s shares rose $2.54 to close at $24.05 Monday on the Nasdaq Stock Market, where Yahoo’s shares gained 1 cent to close at $32.20.

The acquisition continues a recent flurry of dealmaking in the lucrative business of online searching, a crucial axis on which much of the Internet’s utility depends.

By buying Pasadena, Calif.-based Overture, Yahoo gains control of one of its most important business partners and strikes a blow against Google and Microsoft.

A fierce rival of Google, which offers ad-based results distinct from its popularity-based search rankings, Overture now threatens to become more formidable by tapping into Yahoo’s greater resources, which included $1.1 billion in cash as of June 30.

Privately held Google, which provides some search results to Yahoo, declined to comment on Monday’s deal. Microsoft, whose MSN service, like Yahoo, has been collecting steady profits from Overture, was circumspect.

Lisa Gurry, MSN’s group product manager, said the software giant will make its next move after examining how Yahoo’s deal might affect its relationship with Overture.

Although Yahoo executives said they hope to maintain Overture’s existing alliances with partners such as MSN, it seems improbable that the rivals will want to subsidize each other, said Danny Sullivan, editor of the industry newsletter Search Engine Watch.

“This hurts MSN because Overture had been one of its best buddies,” Sullivan said.

MSN has been pouring more resources into online searching in an effort to become less reliant on services provided by outsiders. Besides relying on Overture for some of its search results, MSN also draws upon Inktomi, a search engine service that Yahoo acquired earlier this year for $279.5 million.

During the past 18 months, Overture has become increasingly valuable to Yahoo, prompting predictions that the two companies eventually would unite.

Overture has played a pivotal role in Yahoo’s recent financial revival, accounting for roughly 20 percent of Yahoo’s revenue of $604 million during the first half of this year.

Conceived by dot-com entrepreneur Bill Gross in 1997, Overture developed a search engine that sorts its results based on how much advertisers are willing to pay to be ranked under specific words.

Overture’s commercial database feeds search engines at popular Web sites such as Yahoo and MSN, which display the advertising links along with results generated by objective, algorithmic formulas.

Ridiculed just a few years ago, the so-called “pay-for-performance” concept has turned into an online gold mine. Pay-for-performance search is expected to generate $2 billion in revenue this year and U.S. Bancorp Piper Jaffray expects the lucrative niche will reach $5 billion in 2006.

Overture has cashed in on pay-for-perfmorance’s popularity, attracting 88,000 advertisers while generating earnings of $114 million since it first became profitable in the summer of 2001.

But the company’s success attracted more competition, most notably from Mountain View, Calif.-based Google, which has lured away pivotal partners such as AOL and EarthLink and spurred pricing concessions that have lowered Overture’s profit margins.

Although it followed in Overture’s footsteps, Google now has a slight edge over its rival in the United States. Domestically, Google’s network generated about 54 percent of all paid search results compared to 45 percent for Overture, according to market research compiled by comScore qSearch.

The competitive pressures prompted Overture’s management to lower its profit projections earlier this year and contributed to a downturn in the company’s stock, opening the door for Yahoo’s offer.

The deal supplements Yahoo’s recent acquisition of Inktomi with two other search engine services, AltaVista and Alltheweb.com, that Overture bought earlier this year for a total of $207 million.

Putting all those search engine tools under one roof is likely to create overlap, Sullivan said.

Yahoo executives believe all the services will help further its quest to overtake Google as the Web’s most popular search engine.

“We now own all the crucial elements of an end-to-end search offering,” Yahoo CEO Terry Semel said during an analyst call Monday.

Google continues to provide some of Yahoo’s search results. Semel declined to comment how the Overture acquisition will affect Yahoo’s relationship with Google. “I didn’t lay awake last night wondering about that,” Semel said in an interview Monday.

As a counter-punch to Yahoo’s moves, Microsoft seems more likely to acquire a search engine company, Sullivan said.

Potential candidates include Ask Jeeves Inc., FindWhat.com Inc. and, perhaps even Google.

MSN’s Gurry declined to comment on the company’s possible interest in Google.

Service Providers suck. They hire guys like me to figure out how to maximize the share-of-wallet while containing the growth and supporting their other, boneheaded, legacy products. Generally speaking, carriers are obstacles to the adoption of technology, rather than instigators of it.

What this article hints at is a mesh of ad-hoc mobile phone users each sharing their network capacity and organically frequency-hopping to avoid network trouble zones. Whereas it has proven impossible for mobile phone network dweebs to engineer reliable wireless services in North America, this could be the answer.

More and more spectrum will be made available to the general public around this world, or we will figure out better ways to use that which is already allocated. In the end, the Return On Investment that carriers expect for their 3G licenses, which already has an event horizon measured in decades, may never happen.

Regulatory bodies will be faced with bolstering floundering wireless carriers, which are clearly obstacles to growth, or enabling an ecosystem of radical technologies to flower into a jungle of new technologies, applications, and networks. The trend of technology and invention clearly favours the latter.

-Ian.

——— http://story.news.yahoo.com/news?tmpl=story&ncidR8&e=4&cidR8&u=/ap/ 20021125/ap_on_hi_te/the_new_spectrum

New Gadgets May Spark Deregulation Mon Nov 25, 7:38 AM ET Add Technology – AP to My Yahoo!

By BRIAN BERGSTEIN, AP Business Writer

NEW YORK (AP) – It almost sounds too “Star Trek” to be possible: A multipurpose cell phone that also serves as an FM radio, walkie-talkie, garage door opener and TV remote control.

And what if every time you made a call with that handset it increased the performance of other phones already in use — instead of competing for airwaves with them?

While such wireless wizardry remains a few years off, those days could be coming faster now, thanks to a rare confluence of technology breakthroughs and a rethinking of airwave regulation by the federal government.

“It is kind of an interesting point in time when it comes to wireless networks,” said Dallas Nash, co-founder of Mississippi-based SIGFX LLC, a player in the impending wireless revolution.

SIGFX figured out how to transmit cell phone calls in a thin part of the airwave spectrum already used by TV stations. By dramatically reducing the cost and increasing the range of wireless phone networks, the invention could bring reliable service to rural areas and developing countries.

Vanu Bose has big dreams, too: to create that new generation of radios — that’s really all that cell phones and garage-door openers are — that can move between various functions with an icon click. The trick is to replace much of the circuitry found in radios with flexible software.

Bose began working at it in a military-sponsored communications project at the Massachusetts Institute of Technology (news – web sites). After graduating in 1998, he started his own company, Vanu Inc., to further develop the technology.

Now Cambridge, Mass.-based Vanu Inc. has created an all-software base station — which relays calls from wireless phones on cellular networks. Vanu also has built a prototype handheld computer that can make calls on different kinds of wireless networks and work as a walkie-talkie, baby monitor, FM radio — “whatever you want,” Bose said.

The big challenge is that the device is limited to 10 to 20 hours of battery life. Bose — son of the stereo engineer who founded Bose Corp. — believes that with more development and improvements in low-power microprocessors, the device could be the size of a cell phone and have a much longer battery life.

At the same time, other researchers are making progress in developing “smart” radio receivers that can, on their own, determine instantaneously when and where a bit of spectrum is going unused and switch their communications accordingly to avoid interference. (A method of doing that is already employed in cellular networks and cordless phones).

In fact, advocates of an “open spectrum” or a “commons” policy believe new generations of radio receivers will routinely handle their own conversations and help relay others at the same time.

“If every radio is both a transmitter and a receiver, as you add more, you add capacity to the network,” said David P. Reed, a former chief scientist at Lotus Development Corp. and a leader of the “open spectrum” movement.

“My gut feeling,” Reed said, “is that in 10 or 20 years this will be as big as the Internet.”

That may seem a wide-eyed prediction, but ideas like this are not just grass-roots dreams.

Intel Corp. backs software-defined radio in hopes it will ignite an explosion of demand for wireless chips. The military’s Defense Advanced Research Projects Agency (DARPA) is working on several ways to “increase spectrum usage by dynamically sensing and adapting in frequency, time and space.”

Researchers at Bell Laboratories, part of Lucent Technologies Inc., recently announced a breakthrough in their BLAST technology, which takes advantage of interference on a network to increase the rates at which data can be sent.

Many technology experts say such breakthroughs should force a revolution in how we treat the airwaves. Since the 1920s, electromagnetic spectrum has been handled like real estate. The government licenses use of slices of spectrum and tightly regulates what can be done in those bands.

Much of the spectrum is tied up — largely by the military — and there’s only so much room for experimental and innovative new technologies in unlicensed bands, such as those occupied by cordless phones and the wireless networking system known as WiFi.

But in what looks like the beginning of a historic policy shift, the Federal Communications Commission (news – web sites) has been listening closely to the technology crowd — and to cellular carriers that spent tens of billions of dollars for spectrum licenses and want more freedom to use or trade them as they see fit.

“We have perhaps the most interesting debate in spectrum governance taking place in America since the 1930s,” said Adam Thierer, director of telecommunications studies at the Cato Institute, a libertarian think tank.

This month, a task force appointed by FCC (news – web sites) Chairman Michael Powell — and headed by the former leader of DARPA’s communications research — offered a framework for a spectrum policy overhaul expected to begin next year.

The group said the government should grant wireless carriers more flexibility with their expensive spectrum licenses so they may lease portions of the airwaves that go unused at certain times, for example.

It also endorsed the “commons” concept in some circumstances, saying new technologies should have more freedom to operate in regulated bands — as long as they don’t interfere with cellular conversations or radio broadcasts — and in unlicensed parts of the spectrum as well.

In essence, the FCC finally would be treating spectrum like real estate in the physical world, where the public has easements and parks alongside private property, and airplanes can fly overhead.

Such monumental changes probably will provoke some fights in Washington.

“Certain ossified licensees will inherently be resistant to change,” said Bryan Tramont, Powell’s senior legal adviser.

Even parties who are clamoring for change are circumspect. Wireless phone carriers, for example, praise the FCC’s efforts to modernize spectrum policy. But some say technologies such as software-defined radio might be too unproven to form the basis of policy changes.

They also worry that low-power transmissions by rival technologies on or near already-licensed frequencies could interfere with wireless phone conversations.

“It’s hard to oppose looking at spectrum policy anew,” said Doug Brandon, AT&T Wireless’ vice president of federal affairs. But, he added, eventually, “someone will say, `My ox just got gored.'”

———–

This beats the old daze, when the RBOCs would have tried to replicate this huge media empire themselves, but I still don’t see how Yahoo! can reap profitability based strictly on the ad revenues. There’s got to be some cash flowing from SBC to YahoO!

-Ian.

— http://story.news.yahoo.com/news?tmpl=story&u=/ap/20020913/ap_on_hi_te/ yahoo_high_speed Technology – AP Yahoo, SBC Unveil High-Speed Service Fri Sep 13, 6:13 AM ET

By MICHAEL LIEDTKE, AP Business Writer

SAN FRANCISCO (AP) – Online powerhouse Yahoo Inc. and regional phone giant SBC Communications Inc. on Friday unveiled a high-speed Internet service designed to convince more people that broadband is worth the extra money.

Sunnyvale-based Yahoo and San Antonio-based SBC have been working on the service since they joined forces last year. The new service, available in all 13 states where SBC provides phone service, will allow subscribers to surf the Web at speeds up to 25 times as fast as traditional dial-up modems.

The new service’s content is supposed to be just as big of a selling point as its speed. Yahoo has developed a souped-up version of its popular Web page that will provide subscribers with a wide range of exclusive entertainment options and other applications unavailable anywhere else.

“We have been programming to the lowest common denominator until now,” said Jim Brock, a Yahoo senior vice president who oversaw the project. “This is going to change the broadband landscape.”

The alliance between Yahoo and SBC stems from a recognition that the fast speeds and “always on” connections provided by broadband aren’t enough to persuade most people to dig deeper into their pockets to pay for the service.

“Broadband adoption is going to have to be content driven,” said industry analyst Mark Kersey of the La Jolla research firm ARS Inc. “There has to be something available on broadband that people can’t get on dial-up before people will pay more.”

The average monthly charge for a digital subscriber line — one of the most widely used forms of broadband — is $51.36, according to ARS. The average monthly price for a high-speed cable modem ( news – web sites) is $45.31, ARS said.

In contrast, the most popular dial-up services charge $20 to $24 a month.

To promote their new service, Yahoo and SBC will offer promotional discounts of $29.95 to $39.95 per month, depending on which of three transmission speeds a subscriber wants. After six months, the subscription rate will become $42.95 to $59.95 per month.

The companies are confident price won’t discourage subscribers.

“This will bring broadband to the masses,” predicted Jason Few, an SBC vice president overseeing the new Yahoo service. Subscribers should be able to launch the service within a week of signing up, Few said.

Yahoo and SBC aren’t the first formidable partners to enter the broadband market with lofty ambitions.

Microsoft’s MSN service and regional phone carrier Qwest Communication last year rolled out a high-speed Internet service that hasn’t made a significant dent in the market, Kersey said.

The broadband market has been growing steadily, but not at the rapid clip that telecommunication providers envisioned when they made huge investments in broadband networks during the late 1990s.

There’s about 15.2 million broadband subscribers today, up from 9.1 million a year ago, ARS said.

The new Yahoo and SBC service will have a big customer base to build upon.

SBC has about 35 million residential customers in California, Texas, Missouri, Kansas, Oklahoma, Arkansas, Illinois, Wisconsin, Ohio, Michigan, Indiana, Connecticut and Nevada. The company already has 1.7 million broadband subscribers and 1.6 million customers with dial-up Internet services.

Yahoo is counting on the new broadband service to help it recover from the dot-com bust that wiped out a large chunk of its advertising revenue. The company has been trying to sell more fee-based services under a new management team led by former Hollywood executive Terry Semel.

“We view this as a foundation for developing compelling subscription products,” Brock said.

———–

By CATHERINE TSAI, AP Business Writer

DENVER (AP) – The latest savior for a telecom industry struggling through a digital revolution is an old mainstay: the phone book.

Qwest Communications International Inc. is selling its QwestDex directory unit in a $7.05 billion deal to reduce its $26.6 billion in debt.

In April, the telecom McLeodUSA Inc. closed a deal to sell its directory to the British Yell Group, which already owned Yellow Book USA.

And now Sprint Corp. is considering whether to sell its directory business.

With memories of dot-com collapses still fresh, investing in the directories is a safer bet, said John Kelsey, chief executive of Yellow Pages consultant The Kelsey Group.

That worked out well for Qwest, which was trying to ease investors’ concerns about liquidity issues.

After months of negotiations, Qwest reached a deal last week to sell QwestDex to the private equity firms The Carlyle Group and Welsh, Carson, Anderson and Stowe.

“Our investors will benefit from the stable, predictable cash flows of the directories business without assuming the risks that characterize many other telecom-related investments today,” said James Attwood, managing director of The Carlyle Group.

The print phone directory business has been the most profitable in media during the latest economic slump, Kelsey said. Until Internet directories catch on among more users, it should remain steady, he said.

“In five years, I think there will be less interest in investing in the Yellow Pages business,” Kelsey said. “But right now, it’s a solid business with healthy returns, and it will continue to have healthy returns for years.”

British Telecom spun off its Yellow Pages division to ease what was then $39.8 billion of debt and sold it last year to venture capitalists.

The resulting Yell Group was the business that bought McLeodUSA Publishing this year for $600 million.

Yell viewed its purchase as a way to increase its foothold in the United States.

“It helped Yell confirm its position as the largest independent directory publisher in the fastest growing sector of the world’s largest directory publishing market,” Yell spokesman Jon Salmon said.

But while some telecoms are selling, Verizon is expanding its directory business. Representatives are selling ads for a new Colorado Springs edition that is to be delivered this fall, and within two weeks they will sell ads for a Denver edition set to debut next summer.

———–

Satellite Radio Firms Issue Warning Thu Aug 15, 4:03 PM ET

By SIMON AVERY, AP Business Writer

The nation’s two satellite radio companies are racing to line up new financing before they run out of cash next year — just a short time after launching nationwide services offering scores of digital channels to motorists.

Shares of Sirius Satellite Radio plummeted nearly 44 percent Wednesday, to 76 cents, after the New York-based firm said it was not signing up subscribers as fast as predicted.

Shares of Washington-based rival XM Satellite Radio Holdings fell more than 4 percent to $2.89.

Both companies warned investors about low cash positions in filings with the Securities and Exchange Commission ( news – web sites) this week.

On Wednesday, XM Satellite said it would run out of cash in the first quarter of next year and would have to discontinue operations if it did not raise additional funds.

Chance Patterson, XM Satellite’s vice president of corporate affairs, declined to say how much the company needed to raise by early next year, but said the company expected to break even by late 2004 or early 2005.

Unlike Sirius, XM Satellite has exceeded early subscription forecasts. Since launching nationally in November, the company said it had signed up 136,000 customers at the end of June — compared to an anticipated 130,000.

XM Satellite remains on track to report 200,000 subscribers at the end of the current quarter and 350,000 subscribers by the end of the year, Patterson said.

On Tuesday, Sirius reported that it needed to raise another $300 million by mid-2003 and warned it might have to file for bankruptcy protection without the cash injection.

“The issue is can we get the money,” said Sirius spokesman Jim Collins. “The concern is that the environment is so negative that analysts have concerns that the industry cannot raise that money.”

But Collins insisted that Sirius’ business plans are on track, even though subscriber growth failed to meet expectations in the last quarter.

This week Sirius cut its year-end target to 75,000 customers, down from an earlier forecast of between 100,000 and 150,000.

Making matters worse, some analysts said Sirius is burning through its remaining $300 million faster than expected.

“Cash burn is running somewhat higher than we have been expecting,” John Stone, an analyst with Ladenburg Thalmann wrote in a report. “This higher cash burn highlights the importance of securing funding for the company.”

Among the financing options Sirius is considering is a debt-for-equity swap, or an additional equity investment by Blackstone Group and Apollo Management or other major equity holders.

In a report entitled “Listen Up — Get Out While You Can,” Merrill Lynch analyst Marc Nabi said all paths will “lead to significant dilution to current equity holders should funding ultimately become available.”

Collins said Sirius’ growth has been hampered by supply constraints that occurred after the company pushed its nationwide launch ahead one month to July 1. Consumers will find the satellite radio kits easier to buy as Panasonic and Audiovox introduce receivers later this year, on top of three existing independent brands, he said.

“We feel it’s a product awareness issue,” Collins said.

Sirius spent $1.9 billion on its network of three satellites and 92 land bases that transmit some 60 channels of commercial-free music and some 40 channels of talk and children’s programming.

The company charges $13 a month for its service, which requires an upfront consumer investment of at least $250 for a receiver, antenna and radio. On Tuesday, Sirius reported a second quarter loss of $124.6 million, or $1.62 per share, on revenue of $70,000.

XM satellite spent about $1 billion on its satellite and ground station network. The company charges a monthly fee of $10 for access to more than 100 channels, although the service is not commercial-free.

———–

By BRUCE MEYERSON, AP Business Writer

NEW YORK (AP) – Nearly 200 technology companies have signed on to the latest industry attempt to forge a universal wireless standard for all cell phones and handheld computers.

The Open Mobile Alliance, formally announced Wednesday, will replace the WAP Forum, whose Wireless Application Protocol is the most widely used platform for Web browsers on cell phones, but has fallen short of expectations.

Besides names like Motorola, Nokia ( news – web sites) and Vodafone, perhaps the most notable member of the new group is Microsoft Corp., which in the past has shunned many industry attempts at wireless unity. NTT DoCoMo ( news – web sites), which provides the wildly popular i-mode cellular service in Japan, is also joining the consortium.

But conspicuously absent from the alliance is Palm Computing, whose popular operating system for mobile devices still accounts for more than half of all handheld computers sold. Palm did not return phone calls seeking comment.

The new group plans to define minimum specifications for any wireless platform or application, thereby enabling compatibility and interoperability among different mobile devices regardless of the software used.

“For some of us that have been involved in mobile standards in the past few years, we haven’t done a very good job,” said Jerry Upton, Motorola vice president for standards and strategy and chairman of the WAP Forum’s board of directors.

Upton said that the new group will succeed where prior endeavors came up short by avoiding the tangle over choosing one operating system or another as a universal platform. Instead, the goal will be to develop an open standard for the software code used to create different platforms, including those designed for special purposes and private networks used by businesses.

Presently, wireless device makers, service providers and software developers use a variety of disparate operating systems and applications that can make it hard for different devices and networks to interact.

At the same time, many of these players have joined up with competing alliances, hedging their bets on which standards might likely dominate wireless computing in the same way that Windows is the dominant platform for personal computers.

“There have been so many forums ‹ about 50 of them ‹ having some involvement in our business on applications,” said Alan Cox, head of standards for Vodafone, the world’s biggest cellular company and joint-owner of Verizon Wireless. “We are very keen that these different groups need to be working together, not fighting each other.”

Microsoft has pushed its PocketPC platform as a proprietary operating system for handheld computers and a Smartphone platform for mobile handsets. Meanwhile, in Europe, a consortium that includes Nokia and Ericsson ( news – web sites), licenses an operating system for mobile devices named Symbian.

However, many of the software and services designed for those platforms are not readily compatible with WAP-based or Palm-based applications, a situation that many in the wireless industry see as an obstacle to rapid growth and profits.

The new alliance hopes that the resulting standards will accelerate the development and adoption of new services and capabilities such as multimedia messaging, game playing and entertainment.

Other groups that have agreed to merge into the new alliance include the Open Mobile Architecture initiative, the SyncML Initiative, the Location Interoperability Forum, the MMS Interoperability Group and the Wireless Village Initiative.

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http://www.ifilm.com/ifilm/product/film_info/0,3699,2411541,00.html

-Ian.

——- http://dailynews.yahoo.com/h/ap/20011120/tc/earns_softbank_1.html

Tuesday November 20 1:46 PM ET

Softbank Racks Up Investment Losses

By YURI KAGEYAMA, AP Business Writer

TOKYO (AP) – Japanese Internet giant Softbank Corp. (news – web sites) recorded 54.3 billion yen ($441 million) in losses for the first fiscal half, largely because of crumbling losses in investments that had once formed its global empire.

The earnings results for the six months ended in September marks a gradual reversal of fortune for the Tokyo-based company, praised for years here as a pioneer in the Internet as well as in venture businesses reflected in the risk-taking spirit of its U.S.-educated president Masayoshi Son.

In the previous fiscal year, Softbank had posted a profit of 36 billion yen for the first half and 37 billion yen in profit for the full year ended in March on strong earnings from its Internet financial services. Softbank didn’t give an earnings forecast for the year ending in March 2002.

For the first half, Softbank recorded sales of 183 billion yen ($1.5 billion), up 2 percent from 180 billion yen a year ago on strong earnings from Yahoo! and Softbank Commerce, an electronic commerce unit.

The company, however, took a special charge of 71 billion yen ($577 million), including about 56 billion yen ($455 million) in securities holdings-related losses.

While acknowledging uncertainties remained both in the global economies and the stock market, Softbank reaffirmed its faith in the digital industry as a viable business for the future, if not the immediate future.

Softbank said it will continue to work on a recently started high-speed Internet-access service in Japan.

Officials said they will more strictly monitor the performance of the companies they invest in. They said they already withdrawn from eight companies during the first half and plans to abandon 10 more during the rest of the fiscal year. Softbank owns stakes in about 400 group companies.

In Tokyo trading, ended shortly before the earnings announcement, Softbank shares closed down 2 percent at 2,635 yen ($21).

AT&T doesn’t HAVE any more money to plunk into E@H, and since they’re in the process of saying Bye-bye to the Cable unit, there’s some question as to why they NEED @Home anymore.

The company’s too expensive to buy (plus the losses are SCARY), the individual service elements are each (at best) 2nd or 3rd place in the market, and they don’t have a single market leader among the whole lot.

Not good.

-Ian.

——— http://dailynews.yahoo.com/h/ap/20010820/tc/exciteathome_outlook_3.html

Monday August 20 6:03 PM ET

Auditors Doubt ExciteAtHome Survival

By BRIAN BERGSTEIN, AP Business Writer

SAN JOSE, Calif. (AP) – High-speed Internet access provider ExciteAtHome, formed in one of the biggest mergers of the dot-com heyday, could be on the verge of joining the growing list of high-tech flameouts.

The Redwood City-based company updated its annual report to the Securities and Exchange Commission (news – web sites) on Monday to add a note from its auditors expressing “substantial doubt about the company’s ability to continue as a going concern.”

The report sent ExciteAtHome shares down 40 cents, or 46 percent, to 47 cents in trading on the Nasdaq Stock Market.

ExciteAtHome, which lost $7.44 billion in 2000 and $346.3 million in the most recent quarter, already had said it needed substantial funding to stay alive into next year. The company is controlled by AT&T Corp., which owns 23 percent of ExciteAtHome stock but has a 74 percent voting stake.

In June, ExciteAtHome helped avert a major cash crisis by selling $100 million worth of notes that can be converted into company stock.

That deal required ExciteAtHome shares to stay listed on a major stock exchange. However, ExciteAtHome has fallen below the Nasdaq Stock Market’s minimum requirements for net assets, stockholders’ equity and share price.

If the stock were to be delisted, ExciteAtHome would be forced to speed up its repayment of the notes, auditors Ernst & Young pointed out in the refiled annual report.

ExciteAtHome spokeswoman Alison Bowman said the company has not yet gotten a delisting notice from the Nasdaq.

ExciteAtHome said its stockholders have approved a reverse stock split that would increase its trading price above $3, the minimum for a company that does not meet Nasdaq’s minimum requirements for assets and shareholder equity. But there are no assurances the price would remain above $3.

To conserve cash, ExciteAtHome is cutting 200 jobs this month, plus another 90 at its MatchLogic subsidiary, an online marketing company. That follows at least 630 layoffs at ExciteAtHome earlier this year, and the SEC report said even more jobs could be cut in the current quarter. The company has 2,200 employees.

ExciteAtHome was born in 1999 out of the $6.7 billion merger of At Home Corp., a leading provider of fast Web access over cable TV lines, and Internet portal Excite Inc. – which just happened to be headquartered across the street from each other in Redwood City.

By linking Internet access and Internet content, the deal was supposed to make the company a strong competitor to America Online, now part of AOL Time Warner Inc.

But while the company’s cable-modem subscriber base has risen from 330,000 at the time of the merger to 3.7 million now, the network has required costly investments.

In June, cable TV providers Comcast Corp. and Cox Communications Inc. decided to end their deals to offer Internet access exclusively through ExciteAtHome.

And the Excite portal has suffered severely from the plunge in Internet advertising, a market not expected to recover this year.

ExciteAtHome executives have said since April they were looking for someone to buy its media properties, which in addition to Excite include the Blue Mountain greeting cards site and Webshots, a site devoted to online photos.

When they fired him they triggered a clause in his contract that stipulates that they have to pay him $32K per month FOR LIFE. Crazy.

So if he has the balls to show up, he’ll be in Bankruptcy court alongside all of Webvan’s legitimate suppliers, trying to stake a claim on some percentage of the process from the sale of WebVan’s assets.

Any guesses who might buy those assets? I’m betting on Safeway-TESCO.

-Ian.

———- http://dailynews.yahoo.com/htx/ap/20010709/tc/webvan_bankruptcy_6.html

Monday July 9 12:34 PM ET

Online Grocer Webvan Shuts Down

By MICHAEL LIEDTKE, AP Business Writer

SAN FRANCISCO (AP) – Online grocer Webvan Group Inc. (NasdaqNM:WBVN – news) closed Monday and said it would file for Chapter 11 bankruptcy protection from its creditors.

The decision will lay off 2,000 employees and terminate the Foster City-based company’s service to 750,000 active customers in seven markets – San Francisco, Los Angeles, Orange County, San Diego, Seattle, Chicago and Portland, Ore.

Launched in mid-1999, Webvan had been one of the Internet’s highest profile businesses. Promising to revolutionize the supermarket industry by taking orders online and delivering groceries to customers’ homes, Webvan had raised about $800 million from venture capitalists and Wall Street.

But the company never came close to making money, losing $830 million since its inception.

“We are very proud of what we accomplished,” Webvan spokesman Bud Grebey said in an interview Monday. “We do believe we had a brilliant concept. We were just ahead of our time.”

Webvan’s board voted to close the company Friday, Grebey said, but didn’t start closing its distribution centers until Sunday. Webvan also pulled the plug on its Web site Sunday.

Each of the company’s hourly workers will receive their earned wages, accrued vacation plus a $900 gift from an anonymous donor, Grebey said. Salaried workers will receive their bonuses for the first half of the year, as well as earned wages and accrued vacation.

Although Webvan had pledged to weather the dot-com downturn, the company’s collapse didn’t come as a surprise. The company has pulled out of three markets – Atlanta, Sacramento and the Dallas area – in an effort to conserve its dwindling cash reserves.

Webvan had warned that it needed an additional $25 million by March 2002 to stay open, but a downturn in customer orders during the past three months forced the company to burn through even more money than management anticipated.

As of June 30, Webvan estimates it had $38 million to $40 million in cash, down from roughly $100 million on March 31.

The company plans to file for bankruptcy in the next week or two, Grebey said. Under the supervision of a bankruptcy judge, Webvan will draw up a plan for repaying its creditors.

Webvan listed liabilities totaling $96.5 million as of March 31 in its most recent quarterly filing with the Securities and Exchange Commission. Webvan dealt with 75 distributors and 500 vendors, according to its SEC filings.

The company’s list of unsecured creditors will include Webvan’s former CEO George Shaheen, who resigned in April, triggering a clause in his contract that required the company to pay him $31,250 per month for the rest of his life. With the bankruptcy, Shaheen “will have to get in line with the rest of our creditors,” Grebey said.

To pay its creditors, Webvan plans to sell its remaining assets. The company had invested heavily in a network of huge distribution centers to support its delivery service. The largest centers, spanning roughly 350,000 square feet, are in Carol Stream, Ill., Suwanee, Ga. and Oakland, Calif.

The bankruptcy represents a final blow for Webvan’s devastated shareholders. The company’s market value has plunged by $7.2 billion since Webvan’s November 1999 initial public offering at $15 per share. The stock peaked at $34 shortly after the IPO, but has been stuck below $1 per share all of this year. The stock’s last trading price Monday was 6 cents per share.

In a sign of the company’s desperation, Webvan’s shareholders last month approved a 1-for-25 reverse stock split in a last-ditch effort to boost the shares above $1 and avoid being delisted from the Nasdaq Stock Market.