Internet Stocks Rally on @Home's Acquisition of Excite for $6.7 Billion

Strategic Insights -

Analysts are predicting a wave of similar deals following the merger between @Home, a high-speed internet access provider, and Excite, an internet portal. The acquisition, valued at $6.7 billion, is the largest in the internet sector since America Online's $4 billion purchase of Netscape Communications last year. This deal highlights the intense competition among leading internet portals, with AOL, Yahoo!, and Microsoft establishing themselves as global brands, forcing others like Excite, Lycos, and Infoseek to seek partnerships.

Key Takeaways:

  • The @Home-Excite merger is the largest in the internet sector, valuing at $6.7 billion, surpassing AOL's $4 billion acquisition of Netscape Communications last year.
  • The deal underscores the fierce competition among leading internet portals, with AOL, Yahoo!, and Microsoft emerging as global brands.
  • Second-line competitors, such as Excite, Lycos, and Infoseek, are seeking partnerships to stay competitive.
  • @Home will pre-set its internet service to direct customers to Excite's range of services, expanding Excite's audience to about 60 million cable TV users.
  • Ford Cavallari, vice-president of internet strategies at Renaissance WorldWide, expects more deals between internet service providers.
  • Smaller local portals and internet community sites, such as Geocities, could be targets for future deals.
  • @Home's deal with Excite gives the company access to the new market for high-speed internet services, leveraging cable TV's faster communication capabilities.

Statistics:

  • The Nasdaq composite index rose over 1% to 2380 by early afternoon.
  • @Home's shares rose 24% to $109 1/4.
  • Excite's pre-bid value was $3.4 billion, representing a premium of almost 90% for @Home's $6.7 billion acquisition price.
  • @Home expects to have 15-20% more customers by 2002 as a result of the deal.
  • @Home has access to a potential market of about 60 million cable TV users, expanding Excite's audience.

Sources:

  • "Internet stocks rally on @Home's acquisition of Excite for $6.7 billion" (Lex, Page 20)