Overlooking a string of financial losses, investors embraced @Home on Friday as the cable-based Net access provider offered 9 million shares to the public. The offering values @Home at approximately US$1.2 billion, and represents about 8 percent of the company.
In the first hours of trading, the shares more than doubled in price before slipping back down toward their initial level of $10.50. The stock closed at $17 on volume of about 13 million shares.
"There's been intense interest in this company," said Emily Green, an analyst at Forrester Research. "These people have a unique business plan compared to the slew of other Internet offerings out there. They're the only ones who do what they do."
Indeed, investors have consistently warmed to Net-related companies that enjoy a clear head start over rivals. Yahoo, Netscape, and Amazon.com are cases in point, even though the online bookseller's shares were hammered Friday as a result of an almost $7 million quarterly loss. Still, analysts said Amazon's setback was not as serious as expected, and that the company can be expected to rebound.
In the case of Redwood City, California-based @Home, the firm is a pioneer in cable-modem Net access, providing speeds more than 300 times faster than the usual dial-up connections. Although @Home's service is now limited to a select handful of markets, analysts widely believe that the cable industry will embrace the Internet as a vital new revenue stream, and as such the company is poised for a leadership position.
Hopes for the technology are so high, investors seem willing to overlook @Home's $24.5 million loss last year, and an additional loss of about $23 million in the first two quarters of 1997. The company has yet to say when it expects to see profits.
Part of the reason such setbacks can be shaken off is because of the deep, deep pockets backing the venture. Following @Home's IPO, the firm is now 65-percent owned by cable big boys Tele-Communications Inc., Comcast, and Cox Communications. It also has contracts with several other major cable concerns.
One indication of @Home's enormous potential is the fact that one of its backers, Comcast, recently received a $1 billion investment from Microsoft, which clearly believes the Internet is headed toward high-speed TV cables. Microsoft is also owner of tube-based ISP WebTV, and has inked a deal to bundle content from its Microsoft Network with @Home's service.
@Home claims that users spend about a third of their time within the service's own areas, as opposed to surfing the Web. "That's incredible exposure for an ISP," noted Ross Rubin, an analyst at Jupiter Communications. He believes that if such numbers hold up, @Home will be in an excellent position to attract advertisers and thus bolster the company's bottom line.
@Home is now received by about 6,000 subscribers in a dozen US cities. The company hopes to substantially boost this number to around 400,000 subscribers over the next few years. @Home costs between $35 and $50, compared to the approximately $20 flat-rate fee paid by most dial-up customers.
