The precipitous decline of the Nasdaq exchange hasn't killed the high-speed Internet business.
But it certainly has left it looking seriously battered and bruised. And there seems to be no end to the damage in sight.
This week, the latest formerly high-flying firm to join the ranks of the corporate living dead is ExciteAtHome (ATHM), the Redwood City, California company that operates the largest cable Internet service in North America.
The company, whose stock has been trading below a dollar for the last two weeks, released the bad news in a securities filing Monday. In it, the firm's auditors, Ernst & Young, said the company's dwindling stock price puts it in danger of getting delisted from Nasdaq. If that happens, a clause in a company debt agreement could kick in, forcing the company to repay loans in cash at an accelerated rate.
According to Ernst & Young, the conditions "raise substantial doubt about the company's ability to continue as a going concern."
ExciteAtHome reacted Wednesday by dismissing Ernst & Young as its auditor and hiring rival PricewaterhouseCoopers.
The auditor's disclosure -- which pushed ExciteAtHome shares down more than 50 percent -- was the latest bombshell in a string of bad news affecting U.S. providers of high-speed Internet access.
Just last week, Covad Communications Group (COVD), an indebted provider of DSL Internet access, filed for Chapter 11 bankruptcy protection. And earlier this year, DSL providers Rhythms NetConnections and NorthPoint Communications folded, leaving many subscribers scrambling for new sources of always-on Internet connections.
The dismal financial picture is a sharp turnaround from just a year or two ago, when the combination of a booming stock market and boundless optimism among investors around the theme of high-speed Internet access provided bountiful funding for many an upstart broadband firm.
Now, most upstart firms that are still operating consider themselves lucky to be alive. Increasingly, the sole DSL provider in many neighborhoods is the dominant local phone company. And more often, their customers consider themselves fortunate merely to have the ability to continue paying for service.
"People are more resigned now to the idea that broadband, at least temporarily, doesn't seem to be a God-given right," said Justin Beech, operator of broadband news and discussion site DSL Reports.
In the few neighborhoods where users can choose between competing broadband providers, Beech said, most prefer high-speed Internet access through a cable modem rather than DSL, which runs over the telephone network. The preponderance of nightmare stories among users trying to self-install DSL, he said, is one reason for this.
For those who already have cable access through ExciteAtHome, the good news is that it will be business as usual for the time being.
Alison Bowman, an ExciteAtHome spokeswoman, said the company's financial troubles shouldn't affect services for its estimated 3.7 million customers. The company is also sticking to a tentative forecast that its customer base will grow to between 4.8 million and 5 million by the end of the year, she said.
However, the corporate structure that will support those users is likely to be something rather different from the current ExciteAtHome, which drew its name from the 1999 merger of the At Home broadband service with Internet portal Excite.com.
Up until now, the company has been operating as a publicly traded entity part-owned by cable firms Cox Communications, Cablevision Systems, Comcast and AT&T, which controls voting shares.
In a recent research note, Merrill Lynch analyst Henry Blodget, formerly one of the most outspoken cheerleaders for Internet stocks, predicted that the most likely course would be for ExciteAtHome to declare bankruptcy. If that happens, Blodget said, the company will probably reorganize and sell pieces of itself to cable providers or other ISPs.
"With approximately $1 billion of debt, we believe the likelihood that there will be any value left over for the equity holders is small," he wrote in his Friday report, helping to exacerbate the sell-off of ExciteAtHome shares.
ExciteAtHome officials said they had no comment regarding plans for restructuring the company.
But while shareholders ditch their holdings in the company at a frenzied pace, the flip side is that subscribers are hanging in tight.
In fact, Beech said he's observed a far more forgiving tone among subscribers of high-speed Internet access services who post on his site. Just a few months ago, users tended to be much less tolerant of price hikes for high-speed service. Now they're relieved that their connections are at least still active.
That attitude of acceptance, Beech mused, might make it easier for broadband firms to cut costs by placing further limits on users -- such as placing caps on bandwidth use.
"They're prepared for businesses to try and make money, if they'll stay in business," he said.
