NEW YORK (CNNfn) - Cable Internet provider @Home Corp. announced plans Tuesday to acquire Excite Inc. in a $6.7 billion deal that promises to change, once again, the Internet landscape.
By acquiring Excite, one of the few independent Web portals left, @Home hopes to expand its presence on the World Wide Web and become a major player in the all-important e-commerce business.
In return, Excite gains the financial clout to compete with rival portals such as Yahoo! and NBC's Snap.
"The synergies of the companies are terrific," said Tom Jermoluk, CEO of @Home, in an interview with CNNfn. "I think shareholders will look at that together and say 'one and one makes 10 here.'"
Web portals are becoming more important as companies strive to become the "first stop" for people online.
As the Web grows, users are faced with a baffling array of new Web page offerings. These Internet companies believe users will welcome a jump-off point with links, both old and new, to sites related to their individual tastes.
In addition, many portals hope to become centers for Internet commerce, a potentially lucrative enterprise as more people begin to shop online.
Portal services are very attractive to online retailers and other marketing-oriented companies.
Most portals require users to register and provide demographic information. Portal firms can then use that specific information by selling targeted advertising geared to each individual users.
So far, Web marketers have had to place banners on pages which they believe attract those types of individuals who will buy their goods and services. Portals offer markets the chance to use narrower, and possibly more effective, measures to entice customers.
Portal companies with strong brand-name recognition like Excite have been in particular demand and George Bell, chief executive officer of Excite, said his firm had more suitors than he could count.
Other Internet firms with portals have already been snapped up. In November, America Online Inc. (AOL) announced a $4.2 billion acquisition of Netscape Communications Inc. (NSCP). Last week, Walt Disney Co. (DIS) and Infoseek Corp. (SEEK) rolled out their new joint venture, a portal known as the GO Network.
Internet investors are already turning their attention to discern who will be next to merge. Daniel Rimer, an Internet analyst with Hambrecht & Quist, predicted those companies ripe for consolidation include Web directory Lycos Inc. (LCOS) along with Inktomi Corp. (INKT), an Internet software firm.
Excite comes at a premium
Under the terms of the agreement, @Home will swap 1.041902 shares of its Series A common stock for each share of Excite stock. That represents a 57 percent premium over Excite's closing price on Friday of $67.50 a share.
However, Jermoluk said the premium is "reasonable" in light of the recent frenzy surrounding Internet stocks.
"It's about a 30-percent premium to their share price over the last 30 days," Jermoluk said in an interview on "The Moneyline News Hour with Lou Dobbs".
"I think that's a very reasonable number in terms of these deals. I think we got it for a fair price. There's not that many people out there that have built a portal with 20 million-plus reach in terms of unique users. They're a precious commodity."
The companies look for the deal to close in approximately three months, assuming both firms' stockholders, along with regulators, approve the deal. The boards of both companies have already given the deal the green light.
@Home (ATHM) said the two companies will merge well, and it expects to increase its work force after the deal is finalized. Bell will remain in his Excite CEO role, reporting to Jermoluk.
The companies said they expected @Home's ability to send data faster, due to its broadband capability, along with Excite's ability to organize and market the Internet's offerings to be a winner with Web users.
Because @Home's Internet access comes over cable television lines, it can deliver data at a much higher speed than the phone lines utilized by the typical Web user.
Excite (XCIT), perhaps best-known for its self-named search-engine services, has, with other Web portals such as WebCrawler, sought to establish a greater Internet presence.
Excite already attracts more than 17 million users to its portal services each month and has about 20 million registered users overall.
In comparison, @Home has just 330,000 subscribers. Part of @Home's challenge is that as of yet, it cannot offer its broadband services everywhere, unlike the nearly ubiquitous phone-based ISPs.
Still, @Home's Jermoluk looks for 1999 to be a "breakout year" for broadband services.
"In putting our first rush of our plan together, we think it would be pretty easy to get 20 percent growth to our current subscribers over the next four years," said Jermoluk.
Rimer said Jermoluk might not be too far off the mark with his predictions for growth.
"For @Home, clearly this provides them with a partner that enables them to access and migrate subscribers across the board," said Rimer.
Through this acquisition, he said, @Home will be better equipped to "prime [subscribers] for high-speed access as it enters their neighborhood."
Excite's Bell found the deal compelling because, while his company's portal might see a lot of traffic, it's still free and his company doesn't have experience in actually collecting payments.
"We lack billing relationships. We lack credit-card relationships with our consumers," said Bell. (250K WAV) or (AIFF)
The increasing consolidation in the Internet can make for strange bedfellows, however. AT&T Corp. (T) has a deal pending to buy Tele-Communications Inc. (TCOMA), which is a major shareholder in @Home.
While AT&T, which already has a marketing agreement with Excite, welcomes further ties to the portal, its narrowband Internet service provider, WorldNet, will be in competition with @Home's broadband offerings in various areas.
Excite's Bell said the two companies' ISPs can co-exist.
"Narrowband's not going anywhere in the future," he said. "This is the only company positioned to go into all the bands. We recognize the importance of dual revenue streams."
Additionally, the Excite deal could create further pressure for AOL.
Last May, Netscape and Excite reached a $70 million deal to share content. When AOL bought Netscape later in the year, Excite became a partner with AOL's portal service.
Now, said Rimer, AOL has to come up with a way to offer broadband service, a plan it has struggled with in the past.
"It catalyzes the pressure AOL is under to understand and really explain its high-speed strategy."
-- by staff writer Randall J. Schultz