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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 16, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AT HOME CORPORATION
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 77-0408542
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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450 BROADWAY STREET
REDWOOD CITY, CALIFORNIA 94063
(650) 569-5000
(ADDRESS AND TELEPHONE NUMBER OF THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
KENNETH A. GOLDMAN
CHIEF FINANCIAL OFFICER
AT HOME CORPORATION
450 BROADWAY STREET
REDWOOD CITY, CALIFORNIA 94063
(650) 569-5000
(NAME, ADDRESS AND TELEPHONE NUMBER OF THE REGISTRANT'S AGENT FOR SERVICE)
COPIES TO:
GORDON K. DAVIDSON, ESQ.
JEFFREY R. VETTER, ESQ.
THOMAS J. HALL, ESQ.
FENWICK & WEST LLP
TWO PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94306
(650) 494-0600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SHARES AMOUNTS TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT PRICE REGISTRATION FEE
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Series A common stock, $0.01 par
value per share, issuable upon
exercise of warrants.......... 2,300,000 $36.96 $ 85,008,000 $23,633
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Series A common stock, $0.01 par
value per share............... 2,310,968 $43.06(1) $ 99,516,060 $27,666
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TOTALS.......................... 4,610,968 -- $184,524,060 $51,299
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(c) under the Securities Act of
1933, as amended (the "Securities Act"), based upon the average of the high
and low prices of the Registrant's Series A common stock as reported by the
Nasdaq National Market on November 12, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT FILES
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.
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PROSPECTUS (SUBJECT TO COMPLETION DATED NOVEMBER 16, 1999)
[EXCITE/@HOME LOGO]
AT HOME CORPORATION
4,610,968 SHARES OF SERIES A COMMON STOCK
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Excite@Home's Series A common stock trades on the Nasdaq National Market.
Last reported sale price on November 12, 1999: $44.56 per share.
Trading Symbol: ATHM
THE OFFERING
Under this prospectus, the selling stockholders named on page 21 of this
prospectus may offer and sell shares of our Series A common stock that they
either:
- acquired upon our acquisition of Narrative Communications Corp.,
- acquired upon our acquisition of Webshots Corporation; or
- may acquire upon the exercise of warrants assumed by us upon our
acquisition of iMALL, Inc.
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INVESTING IN OUR SERIES A COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE
CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is November , 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
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TABLE OF CONTENTS
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Prospectus Summary.................... 3
Risk Factors.......................... 4
Use of Proceeds....................... 21
Dividend Policy....................... 21
Selling Stockholders.................. 21
Plan of Distribution.................. 24
Legal Matters......................... 26
Experts............................... 26
Forward-Looking Statements............ 27
Where You Can Find More Information... 27
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information you should
consider before buying shares in this offering. You should read the entire
prospectus carefully. Unless the context otherwise requires, the terms we, our,
us, the company and Excite@Home refer to At Home Corporation, a Delaware
corporation.
EXCITE@HOME
At Home Corporation, or "Excite@Home" is a global media company that
provides consumers with high speed, high bandwidth Internet connectivity and
content and interactive services on multiple bandwidth platforms. Our @Home
service provides broadband Internet access from consumers' homes over the cable
television infrastructure and offers end-to-end managed connectivity services
for businesses over both cable and digital telecommunications lines. Our media
and marketing services include the Excite Network, a leading consumer Internet
portal and MatchLogic, a targeted advertising platform. The Excite Network
offers search, content, community, communications services and commerce
functionality to Internet users. Excite's media services focus on comprehensive
navigation, global reach and personalization technology designed to attract and
retain users. MatchLogic, a subsidiary of Excite, is a proprietary advertising
distribution platform, that provides advertisers with targeted and campaign
management designed to improve the effectiveness of their advertising campaigns.
Our principal executive offices are located at 450 Broadway Street,
Redwood, California 94063. The primary telephone number for our principal
executive offices is (650) 569-5000. Our web sites are located at
http://www.home.net and www.excite.com. Information contained in our web sites
does not constitute a part of this prospectus. @Home, @Media, @Work and the
@ball logo are our registered trademarks, and @Work Internet is our service
mark. This prospectus also includes trademarks of other companies.
THE OFFERING
Of the shares that may be offered under this prospectus (1) 2,300,000
shares will be issued by us upon the exercise of warrants issued by us under a
Warrant held by First Data Corp., (2) 260,642 shares are held by a former
stockholder of Narrative Communications Corp. and (3) 2,310,966 shares are held
by the former stockholders of Webshots Corporation. These shares are being
offered on a continuous basis under Rule 415 of the Securities Act.
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Series A common stock that may be offered by the selling
stockholders.............................................. 4,610,968 shares
Series A common stock to be outstanding after this
offering.................................................... 349,754,806 shares*
Use of proceeds............................................. We will not receive any proceeds.
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* Based on the number of shares outstanding as of October 31, 1999.
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RISK FACTORS
An investment in our Series A common stock involves a high degree of risk.
You should carefully consider the following risk factors and the other
information in this prospectus before investing in our Series A common stock.
Our business and results of operations could be seriously harmed by any of the
following risks. The trading price of our Series A common stock could decline
due to any of these risks, and you may lose all or part of your investment.
FOR ORGANIZATIONAL PURPOSES ONLY, WE HAVE ORGANIZED THESE RISK FACTORS
UNDER FOUR GENERAL TOPICS: (1) RISKS RELATING TO OUR BUSINESS IN GENERAL,
BEGINNING ON PAGE 4; (2) RISKS RELATING TO OUR BROADBAND SERVICES, BEGINNING ON
PAGE 13; (3) RISKS RELATING TO OUR RELATIONSHIP WITH OUR CABLE PARTNERS,
BEGINNING ON PAGE 17; AND (4) RISKS RELATING TO OUR NARROWBAND SERVICES,
BEGINNING ON PAGE 19.
RISKS RELATED TO EXCITE@HOME'S BUSINESS
WE MAY FAIL TO INTEGRATE OUR BUSINESS AND TECHNOLOGIES WITH THE BUSINESS AND
TECHNOLOGIES OF EXCITE, BLUEMOUNTAIN.COM AND THE OTHER COMPANIES WE HAVE
RECENTLY ACQUIRED OR MAY ACQUIRE
We have completed several acquisitions recently, including our recent
acquisitions of Excite, Inc. in May 1999 and iMALL, Inc. in October 1999. We
have also agreed to acquire Bluemountain.com. We intend to pursue additional
acquisitions in the future. If we fail to integrate these businesses, our
quarterly and annual results may be adversely affected. Integrating acquired
organizations and products and services could be expensive, time-consuming and a
strain on our resources. Risks we could face with respect to acquisitions
include:
- the difficulty of integrating acquired technology or content and rights
into our services;
- the difficulty of assimilating the personnel of the acquired companies;
- the difficulty of coordinating and integrating geographically-dispersed
operations;
- our ability to retain customers of an acquired company;
- the potential disruption of our ongoing business and distraction of
management;
- the maintenance of brand recognition of acquired businesses;
- the failure to successfully develop acquired in-process technology,
resulting in the impairment of amounts currently capitalized as
intangible assets;
- unanticipated expenses related to technology integration;
- the maintenance of uniform standards, corporate cultures, controls,
procedures and policies;
- the impairment of relationships with employees and customers as a result
of any integration of new management personnel; and
- the potential unknown liabilities associated with acquired businesses.
Our inability to address any of these risks successfully could harm our
business.
In particular, a current challenge is to integrate the technology platform
of the @Home network broadband services with Excite's Internet services and the
advertising services of Excite's subsidiary, MatchLogic. Currently, the Excite
narrowband services are operated from Excite's network operations
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centers. Integration of the Excite and MatchLogic services to the @Home network
broadband platform poses a number of technical challenges, including
difficulties associated with providing regularly updated and personalized
content over Excite@Home's broadband services and the difficulties associated
with applying the advertising services and targeting technologies from Excite's
MatchLogic subsidiary with the Excite@Home broadband services. This is
particularly challenging because it is more difficult to provide regularly
updated and personalized information from distributed regional data centers,
which we rely upon to deliver our broadband services, than it is to deliver
services from a central data center, as Excite and MatchLogic currently do in
delivering their narrowband services.
With respect to any future acquisitions, we may be unable to identify
future acquisition targets and we may be unable to complete future acquisitions
on reasonable terms. Even if we complete an acquisition, we may have difficulty
in integrating it with our current organization, technology and product and
services offerings, and any acquired features, functions, products or services
may not achieve market acceptance.
RECENTLY-ACQUIRED BUSINESSES MAY NOT BE SUCCESSFUL
We have recently acquired two companies in the early stage of development
and with unproven business models.
iMALL. Prior to August 1998, substantially all of iMALL's revenues were
attributable to its seminar business. This business was discontinued in August
1998. iMALL has yet to achieve any significant revenue from its current business
of providing turnkey electronic commerce services to online merchants or its
other shopping-oriented web sites. A market for iMALL's services may not
develop, and iMALL's services may not become widely accepted.
Bluemountain.com. The proposed acquisition of Bluemountain.com also
involves a number of risks. For example, the Bluemountain.com electronic
greeting card service currently does not sell advertising on its web sites.
Bluemountain.com users may not accept a service that displays advertising.
Bluemountain.com users may not continue to use the Bluemountain.com service for
other reasons. For instance, competitive electronic greeting card sites have
increased in popularity. Also, the popularity of electronic greeting card
services could decline generally. Additionally, advertisers may not choose to
advertise on the Bluemountain.com service if users do not accept advertising or
purchase goods or services on Bluemountain.com in sufficient quantities.
WE HAVE INCURRED AND EXPECT TO CONTINUE TO INCUR SUBSTANTIAL LOSSES
At Home Corporation was incorporated in March 1995, commenced operations in
August 1995, and has incurred net losses in each fiscal period since its
inception. As of September 30, 1999, we had an accumulated deficit of $961.8
million. Excite, Inc., which we acquired in May 1999, has never been profitable
and Bluemountain.com, which we agreed to acquire in October 1999, has never
realized any significant revenues. In addition, we currently intend to increase
capital expenditures and operating expenses in order to expand our network and
to market and provide our broadband services to potential subscribers as well as
to market our narrowband services. As a result of the acquisitions of Excite and
iMALL and the proposed acquisition of Bluemountain.com, we anticipate that we
will incur substantial non-cash charges including those relating to the
amortization of goodwill and other intangible assets in future periods.
Therefore, we anticipate that we will incur net losses for the foreseeable
future.
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OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE BECAUSE OF A NUMBER OF FACTORS
Our quarterly operating results may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside of our control.
These factors include:
- the level of usage of the Internet in general and portal web sites in
particular;
- subscriber growth rates and prices charged by our cable partners;
- demand for Internet advertising;
- the addition or loss of advertisers;
- the level of user traffic on our websites used for our narrowband
services;
- the mix of types of advertising we sell, such as the mix of targeted
advertising as compared to general rotation advertising;
- the amount and timing of capital expenditures and other costs relating to
the expansion of our operations;
- the introduction of new products or services by us or our competitors;
- pricing changes for Internet-based advertising;
- the timing of marketing expenditures to promote our brands;
- costs incurred with respect to acquisitions; and
- general economic conditions.
Our expense levels are based in part on expectations of future revenue and,
to a large extent, are fixed. We may be unable to adjust spending quickly enough
to compensate for any unexpected revenue shortfall.
Our Internet advertising revenue is subject to seasonal fluctuations.
Historically, advertisers spend less in the first and third calendar quarters,
and user traffic for our narrowband services has historically been lower during
the summer and during year-end vacation and holiday periods.
Due to all of the foregoing factors and the other risks described in this
section, you should not rely on quarter-to-quarter comparisons of our results of
operations as an indication of future performance, particularly in light of the
number of acquisitions we have completed. It is possible that in some future
periods our results of operations may be below the expectations of public market
analysts and investors. In this event, the price of our Series A common stock
may fall.
IF WE DO NOT DEVELOP NEW AND ENHANCED FEATURES, PRODUCTS AND SERVICES FOR OUR
NARROWBAND AND BROADBAND SERVICES, WE MAY NOT BE ABLE TO ATTRACT AND RETAIN A
SUFFICIENT NUMBER OF USERS
Because of the competitiveness of our market, we believe it is important to
introduce additional or enhanced features, products and services in the future
in order to differentiate our services and retain our current users and attract
new users. If we introduce a feature, product or service that is not favorably
received by our current users, they may not continue using our services as
frequently and they may choose a competing service.
We must also continually enhance our products and services to incorporate
rapidly changing Internet technologies. We could incur substantial development
costs if we need to modify our products, services or infrastructure to adapt to
changes in Internet technologies. Our business could
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be harmed if we incur significant costs to adapt to these changes. If we cannot
adapt to these changes, users may discontinue using our services.
We may also experience difficulties that could delay or prevent us from
introducing new features, products or services. Furthermore, these features,
products or services may contain errors that are discovered after the feature,
product or services are introduced. We may need to modify the design of them
significantly to correct these errors. In addition, we must consult with and
involve our principal cable partners in the development and design of new
features, products or services for our broadband services. Therefore, the
process of introducing new broadband features, products and services is time
consuming and if our principal cable partners object to a new feature, product
or service, we could be prohibited from offering it in particular areas. Our
business could be adversely affected if we experience difficulties in
introducing new products and services or if users do not accept these new
products or services.
WE DEPEND ON THE SALE OF ADVERTISEMENTS ON OUR SERVICES, AND IF ONLINE
ADVERTISING DOES NOT BECOME ACCEPTED, OUR BUSINESS WOULD BE HARMED
We expect to derive a substantial amount of our revenues from the sale of
advertising on our services for the foreseeable future. No standards have been
widely accepted to measure the effectiveness of online advertising. If standards
do not develop, existing advertisers may not continue their current levels of
online advertising. Furthermore, advertisers that have traditionally relied upon
other advertising media may be reluctant to advertise online. Advertisers that
already have invested substantial resources in other advertising methods may be
reluctant to adopt a new strategy. Our business would be harmed if the market
for online advertising fails to develop or develops more slowly than expected.
Different pricing models are used to sell online advertising. It is
difficult to predict which, if any, will emerge as the industry standard. This
makes it difficult to project future advertising rates and revenues. For
example, advertising rates based on the number of "click throughs," or user
requests for additional information made by clicking on the advertisement,
instead of rates based solely on the number of impressions, or times an
advertisement is displayed, could adversely affect our revenues because
impression-based advertising comprises a substantial majority of our current
advertising revenues. Our advertising revenues could be harmed if we are unable
to adapt to new forms of online advertising. Moreover, "filter" software
programs that limit or prevent advertising from being delivered to a web user's
computer are available. Widespread adoption of this software could harm the
commercial viability of online advertising.
WE MUST DEVELOP AND MAINTAIN THE AWARENESS OF OUR BRANDS TO ATTRACT CONSUMERS
AND ADVERTISERS
Maintaining and strengthening our brands is critical to achieving
widespread acceptance of our services by consumers and advertisers, particularly
in light of the competitive nature of our markets. Promoting and positioning our
brands will depend largely on the success of our marketing efforts and our
ability to provide high quality services. In order to promote our brands, we
plan to increase our marketing expenses from prior periods. We may find it
necessary to increase our marketing budget or otherwise increase our financial
commitment to creating and maintaining brand loyalty among users. If we fail to
promote and maintain our brands or incur excessive expenses in an attempt to
promote and maintain our brands, our business could be harmed.
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WE COULD FACE LIABILITY RELATED TO THE PRIVACY OF PERSONAL INFORMATION ABOUT OUR
USERS
Our narrowband services use "cookies" to deliver targeted advertising, help
compile demographic information about users and limit the frequency with which
an advertisement is shown to the user. Cookies are bits of information keyed to
a specific drive and passed to a web site server through the user's browser
software. Cookies are placed on the user's hard drive, often without the user's
knowledge or consent. We could face liability relating to the collection and use
of this information, as well as other misuses such as unauthorized marketing
purposes. The Federal Trade Commission and some states have been investigating
Internet companies regarding their use of personal information. In addition, the
United States federal and various state governments have proposed new laws
restricting the collection and use of information regarding Internet users. We
could incur additional expenses if new regulations regarding the use of personal
information are introduced or if they chose to investigate our privacy
practices.
PRIVACY CONCERNS COULD MAKE IT MORE DIFFICULT FOR US TO DELIVER TARGETED
ADVERTISING
Due to privacy concerns, some Internet commentators, consumer advocates and
governmental officials have suggested that the use of cookies be limited or
eliminated. In addition, certain currently available web browsers allow a user
to delete cookies or prevent cookies from being stored on the user's hard drive.
Any reduction or limitation in the use of cookies could limit the effectiveness
of our ad targeting which could harm our business.
THE SPONSORSHIP ADVERTISING WE SELL SUBJECTS US TO FINANCIAL AND OTHER RISKS
We derive a substantial portion of our revenues from sponsorship
arrangements. These are advertising relationships under which third parties
receive sponsored services and placements on our services in addition to
traditional banner advertisements across our services. These arrangements expose
us to potential financial risks, including the risk that we fail to deliver
required minimum levels of user impressions and that third-party sponsors do not
renew the agreements at the end of their term. These arrangements also require
us to integrate sponsors' content with our services, which can require the
dedication of resources and programming and design efforts to accomplish. We may
not be able to attract additional sponsors or renew existing sponsorship
arrangements when they expire.
In addition, we have granted exclusivity provisions to some of our
sponsors, and may in the future grant additional exclusivity provisions. These
exclusivity provisions may have the effect of preventing us from accepting
advertising or sponsorship arrangements from certain advertisers during the term
of the agreements. Our inability to enter into further sponsorship or
advertising arrangements as a result of any exclusivity arrangements could harm
our business.
WE MAY FACE POTENTIAL LIABILITY FROM OUR ELECTRONIC COMMERCE-RELATED ADVERTISING
ARRANGEMENTS
Some of our advertising relationships provide that we may receive payments
based on the amount of goods or services purchased by consumers clicking from
our services to a seller's web site. These arrangements may expose us to legal
risks and uncertainties, including potential liabilities to consumers of these
products and services. Although we carry general liability insurance, our
insurance may not cover potential claims of this type or may not be adequate to
indemnify us for all liability that may be imposed.
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Some of the liabilities that may result from these arrangements include:
- potential liabilities for illegal activities that may be conducted by the
sellers;
- product liability or other tort claims relating to goods or services sold
through third-party e-commerce sites;
- claims for consumer fraud and false or deceptive advertising or sales
practices;
- breach of contract claims relating to purchases; and
- claims that items sold through these sites infringe third-party
intellectual property rights.
Even to the extent that these claims do not result in material liability,
investigating and defending these claims could harm our business.
OUR EQUITY INVESTMENTS IN OTHER COMPANIES MAY NOT YIELD ANY RETURNS
We have made equity investments in many Internet companies, including joint
ventures in other countries. In most instances, these investments are in the
form of illiquid securities of private companies. These companies typically are
in an early stage of development and may be expected to incur substantial
losses. Our investments in these companies may not yield any return.
Furthermore, if these companies are not successful, we could incur charges
related to write-downs or write-offs of assets. We also record and continue to
record a share of the net losses in some of these companies, up to our cost
basis, if they are our affiliates. We and our strategic investors intend to
continue to make significant additional investments in the future. Losses or
charges resulting from these investments could harm our operating results.
WE MUST MAINTAIN THE SECURITY OF OUR NETWORKS
We have in the past experienced security breaches in our networks. While we
have taken steps to prevent these breaches, and to prevent users from sharing
files via the @Home service and to protect against bulk unsolicited e-mail,
public concerns about security, privacy and reliability of our networks, or
actual problems with the security, privacy or reliability of our broadband
network, may inhibit the acceptance of our services.
The need to securely transmit confidential information over the Internet
has been a significant barrier to electronic commerce and communications over
the Internet. Any well-publicized compromise of security could deter more people
from using the Internet or our services or from using them to conduct
transactions that involve transmitting confidential information, such as
purchases of goods or services. Because many of our advertisers seek to
encourage people to use the Internet to purchase goods or services, our business
could be harmed if this were to occur. We may also incur significant costs to
protect against the threat of security breaches or to alleviate problems caused
by these breaches.
OUR LIMITED EXPERIENCE WITH INTERNATIONAL OPERATIONS MAY PREVENT US FROM GROWING
OUR BUSINESS OUTSIDE THE UNITED STATES
A key component of our strategy is to expand into international markets and
offer broadband and narrowband services in those markets. We have limited
experience in developing localized versions of our products and services and in
developing relationships with international cable system operators. We may not
be successful in expanding our product and service offerings into foreign
markets. In addition to the uncertainty regarding our ability to generate
revenues from foreign operations and
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expand our international presence, we face specific risks related to providing
broadband and narrowband services in foreign jurisdictions, including:
- regulatory requirements, including the regulation of Internet access;
- legal uncertainty regarding liability for information retrieved and
replicated in foreign jurisdictions;
- potential inability to use European customer information due to new
European governmental regulations; and
- lack of a developed cable infrastructure in many international markets.
WE MAY BE LIABLE FOR OUR LINKS TO THIRD-PARTY WEB SITES
We could be exposed to liability with respect to the third-party web sites
that may be accessible through our services. These claims may allege, among
other things, that by linking to web sites operated by third parties, we may be
liable for copyright or trademark infringement or other unauthorized actions by
third parties through these web sites. Other claims may be based on errors or
false or misleading information provided by our services. Our business could be
harmed due to the cost of investigating and defending these claims, even to the
extent these types of claims do not result in liability.
PROTECTION OF OUR INTELLECTUAL PROPERTY RIGHTS IS COSTLY AND DIFFICULT
We regard our intellectual property, including our patents, copyrights,
trademarks, trade secrets, and similar intellectual property as critical to our
success. We rely upon patents, trademark and copyright law, trade secret
protection and confidentiality or license agreements to protect our proprietary
rights. Effective protection of intellectual property may not be available in
every country in which our products and services are available. We cannot
guarantee that the steps we have taken to protect our proprietary rights will be
adequate.
WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS, WHICH ARE COSTLY
TO DEFEND AND COULD LIMIT OUR ABILITY TO USE CERTAIN TECHNOLOGIES IN THE FUTURE
Many parties are actively developing Internet-related technologies. We
believe that these parties will continue to take steps to protect these
technologies, including seeking patent protection. As a result, we believe that
disputes regarding the ownership of these technologies are likely to arise in
the future. From time to time, parties assert patent infringement claims against
us in the form of letters, lawsuits and other forms of communications.
In addition to patent claims, third parties may assert claims against us
alleging infringement of copyrights, trademark rights, trade secret rights or
other proprietary rights or alleging unfair competition. For example, we have
two lawsuits pending against us regarding the presentment of advertisements in
response to search requests on "keywords" that are alleged to be trademarks of
third parties. These lawsuits could harm our business. We may incur substantial
expenses in defending against third-party infringement claims regardless of the
merit of the claims. In the event that there is a determination that we have
infringed third-party proprietary rights, we could incur substantial monetary
liability and be prevented from using the rights in the future.
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OUR BUSINESS DEPENDS ON THE CONTINUED GROWTH IN INTERNET USE
We operate in a new and rapidly evolving market. Our business may be
adversely affected if usage of the Internet or other online services does not
continue to grow. This growth could be hindered by a number of factors
including: the adequacy of the Internet's infrastructure to meet increased usage
demands; privacy and security concerns; and availability of cost-effective
services. Any of these issues could cause the Internet's performance or level of
usage to decline.
FUTURE ACQUISITIONS COULD RESULT IN DILUTIVE ISSUANCES OF STOCK AND THE NEED FOR
ADDITIONAL FINANCING
We have typically paid for our acquisitions by issuing shares of our
capital stock. In the future, we may effect other large or small acquisitions by
using stock, and this will dilute our stockholders. We may also use cash to buy
companies or technologies in the future, as we propose to do for a portion of
the purchase price for Bluemountain.com, and we may need to incur additional
debt to pay for these acquisitions. Acquisition financing may not be available
on favorable terms or at all. In addition, we will likely be required to
amortize significant amounts of goodwill and other intangible assets in
connection with future acquisitions, which would materially harm our results of
operations.
WE MUST MANAGE OUR GROWTH
Our growth and recent acquisitions have placed a significant strain on our
managerial, operational, and financial resources. For example, we have grown
from 246 employees at March 31, 1997 to over 2,000 employees at September 30,
1999. In addition, we plan to continue to hire additional personnel. To manage
our growth, we must continue to implement and improve our operational and
financial systems and to expand, train and manage our employee base. Any
inability to manage growth effectively could harm our business.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE INTERNET COULD
HINDER THE POPULARITY OF THE INTERNET
New Internet privacy and other laws. There are currently few laws or
regulations that specifically regulate communications or commerce on the
Internet. However, laws and regulations may be adopted in the future that
address issues such as user privacy, pricing, content and the characteristics
and quality of products and services. For example:
- The United States federal and various state governments have proposed
limitations on the collection and use of information regarding Internet
users. In October 1998, the European Union adopted a directive that may
result in limitations on our collection and use of information regarding
Internet users in Europe.
- Several telecommunications companies have petitioned the Federal
Communications Commission to regulate Internet service providers and
online service providers in a manner similar to long distance telephone
carriers and to impose access fees on these companies. This could
increase the cost of transmitting data over the Internet.
- A portion of the Telecommunications Act, which has since been ruled
unconstitutional, sought to prohibit transmitting certain types of
information and content over the Internet.
Moreover, it may take years to determine the extent to which existing laws
relating to issues such as property ownership, libel and personal privacy are
applicable to the Internet. Any new laws or regulations relating to the Internet
could harm our business.
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Tax laws. The tax treatment of the Internet and electronic commerce is
currently unsettled. A number of proposals have been made at the federal, state
and local level and by certain foreign governments that could impose taxes on
the sale of goods and services and certain other Internet activities. Our
business may be harmed by the passage of laws in the future imposing taxes or
other burdensome regulations on online commerce.
We may have to qualify to do business in other jurisdictions. Because
Excite@Home's service will be available in multiple states and foreign countries
such jurisdictions may claim that it is required to qualify to do business as a
foreign corporation in each of these states and foreign countries. If we fail to
qualify as a foreign corporation in a jurisdiction where we are required to do
so, we could be subject to taxes and penalties.
WE COULD FACE LIABILITY FOR DEFAMATORY OR INDECENT CONTENT PROVIDED ON OUR
SERVICES
Claims could be made against Internet and online service providers under
both United States and foreign law for defamation, negligence, copyright or
trademark infringement, or other theories based on the nature and content of the
materials disseminated through their networks. Several private lawsuits seeking
to impose this liability are currently pending against Internet and online
services providers. Our insurance may not adequately protect it from these types
of claims.
In addition, legislation has been proposed that imposes liability for or
prohibits the transmission over the Internet of indecent content. The imposition
upon Internet and online service providers of potential liability for
information carried on or disseminated through their systems could require us to
implement measures to reduce its exposure to this liability. This may require
that we expend substantial resources or discontinue service or product
offerings. The increased focus on liability issues as a result of these lawsuits
and legislative proposals could impact the growth of Internet use. Furthermore,
some foreign governments, such as Germany's, have enacted laws and regulations
governing content distributed over the Internet that are more strict than those
currently in place in the United States. One or more of these factors could
significantly harm our business.
YEAR 2000 ISSUES COULD AFFECT THE PERFORMANCE OF OUR SYSTEMS
If our internal and network information systems do not correctly recognize
and process date information beyond the year 1999, we may not be able to conduct
operations. We may also experience supplier-related Year 2000 problems. To
address these Year 2000 issues, we have initiated a comprehensive program to
address Year 2000 readiness in our systems and our suppliers' systems. Despite
our investigation and assurances we have received from third party suppliers, we
may still face unforeseen liabilities with respect to the Year 2000 issue.
Furthermore, delays in the implementation of new information systems or a
failure to fully identify all Year 2000 dependencies in our existing systems and
in the systems of our suppliers could harm our business. Therefore, we are
developing, but do not yet have, contingency plans for continuing operations in
the event these problems arise.
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO ATTRACT, RETAIN AND MOTIVATE HIGHLY
SKILLED EMPLOYEES
Our future success depends on our ability to attract, retain and motivate
highly skilled employees. Competition for employees in the Internet industry is
intense, particularly in the Silicon Valley where we are headquartered.
Additionally, it is often more difficult to attract employees once a company's
stock is publicly traded because the exercise price of equity awards such as
stock options are based on the public market, which is highly volatile. We may
be unable to attract, assimilate or
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retain other highly qualified employees in the future. We have from time to time
in the past experienced, and we expect to continue to experience in the future,
difficulty in hiring and retaining highly skilled employees with appropriate
qualifications. This risk is compounded by the fact that we are controlled by
our principal cable partners and therefore, we may not have the same flexibility
as a typical Silicon Valley company to pursue initiatives proposed by
management. Moreover, hiring and retention is made more difficult due to the
uncertainty concerning the relationship we will have with our principal cable
partners following the expiration of their exclusivity obligations in June 2002.
RISKS RELATING TO EXCITE@HOME'S BROADBAND SERVICES
OUR BROADBAND BUSINESS IS UNPROVEN, AND IT MAY NOT ACHIEVE PROFITABILITY
The profit potential of our broadband business model is unproven and our
broadband services may not achieve widespread consumer or commercial acceptance.
We have had difficulty predicting whether the pricing models for our broadband
services will prove to be viable, whether demand for our broadband services will
materialize at the prices our cable partners charge for our broadband services,
or whether current or future pricing levels will be sustainable. If these
pricing levels are not achieved or sustained or if our broadband services do not
achieve or sustain broad market acceptance, our business will be significantly
harmed.
GROWTH OF OUR BROADBAND SERVICE MAY BE INHIBITED BY FACTORS BEYOND OUR CONTROL
Our ability to increase the number of subscribers to our broadband service
to achieve our business plans and generate future revenues will depend on many
factors which are beyond our control. For instance, some of our cable partners
have not achieved the subscriber levels that we had originally anticipated.
Other factors include:
- the rate at which our current and future cable partners upgrade their
cable infrastructures for two-way data services;
- our ability and the ability of our cable partners to coordinate timely
and effective marketing campaigns with the availability of cable
infrastructure upgrades;
- the success of our cable partners in marketing and installing the @Home
service in their local cable areas;
- the prices that our cable partners set for the @Home service and for its
installation;
- the speed at which our cable partners can complete the installations
required to initiate service for new subscribers;
- the commercial availability of self-installable, two-way modems that
comply with the recently adopted interface standards known as DOCSIS, and
the success of the roll-out of these products with the @Home service; and
- the quality of customer and technical support our cable partners provide.
WE NEED TO ADD SUBSCRIBERS AT A RAPID RATE FOR OUR BROADBAND BUSINESS TO
SUCCEED, BUT WE MAY NOT ACHIEVE OUR SUBSCRIBER GROWTH GOALS
Our actual revenues or the rate at which we add new subscribers may differ
from our forecasts. We may not be able to increase our subscriber base enough to
meet our internal forecasts or the forecasts of industry analysts or to a level
that meets the expectations of investors. The rate at which
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subscribers have increased in the past does not necessarily indicate the rate at
which subscribers may be expected to grow in the future. In particular, while we
have forecasted that the number of its subscribers could grow to up to 1.1
million by December 31, 1999, we may not achieve this level of subscriber
growth.
OUR BROADBAND SUBSCRIBER GROWTH IS LIMITED BY INSTALLATION AND PRICE CONSTRAINTS
Installation of the @Home service requires a customer service
representative of a cable partner to install a cable modem at a customer's
location and therefore can be time consuming. If we are unable to speed the
installation of our service, our subscriber growth could be constrained.
Moreover, the @Home service is currently priced at a premium to many other
online services, and large numbers of subscribers may not be willing to pay a
premium for the service. Recently, companies have begun to offer free Internet
access with the purchase of personal computers and some Internet service
providers have reduced or eliminated Internet access charges in exchange for
placing advertisements on a customer's computer screen. If these promotions
become more widely used, or if Internet access fees decline, consumers may be
less willing to pay a premium for broadband services, or our broadband services
in particular.
IF WE CANNOT MAINTAIN THE SCALABILITY AND SPEED OF OUR @HOME BROADBAND NETWORK,
CUSTOMERS WILL NOT ACCEPT OUR BROADBAND SERVICES
Due to the limited deployment of our broadband services, the ability of our
broadband network to connect and manage a substantial number of subscribers at
high transmission speeds is unknown. Therefore, we face risks related to our
network's ability to be scaled up to accommodate increased subscriber levels
while maintaining performance. Our network may be unable to achieve or maintain
a high speed of data transmission, especially as the number of our subscribers
increases. Because of our reliance on regional data centers and the cable
infrastructure in particular geographic locations to support our broadband
services, our and our cable partners' infrastructure must also be able to
accommodate increased subscribers in a particular area. If the existing
infrastructure for a geographic area does not accommodate additional
subscribers, network performance for an area could decline especially if a cable
partner was unwilling to upgrade its infrastructure and we could lose
subscribers in that area.
In recent periods, the performance of the @Home network has experienced
some deterioration in some markets partially as a result of subscriber abuse of
the @Home service. While we are seeking to eliminate this abuse by enforcing our
acceptable-use policy and by limiting users' upstream bandwidth, our failure to
do so may result in slower network performance and reduced customer demand for
our services.
IF NEW DOCSIS-COMPLIANT CABLE MODEMS ARE NOT DEPLOYED TIMELY AND SUCCESSFULLY,
OUR SUBSCRIBER GROWTH COULD BE CONSTRAINED
Each of our subscribers currently must obtain a cable modem from a cable
partner to access the @Home service. The North American cable industry has
recently adopted interface standards known as DOCSIS for hardware and software
to support the delivery of data services over the cable infrastructure utilizing
compatible cable modems. Some of our cable partners have chosen to delay some
deployments of the @Home service until the commercial availability of
DOCSIS-compliant cable modems is widespread, among other reasons. Subscriber
growth could be constrained and our business could be significantly harmed if
our cable partners choose to slow the deployment of the @Home service further.
If our cable partners are not able to obtain a sufficient quantity of DOCSIS-
compliant modems, our growth will be limited.
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We also believe that in order to meet our subscriber goals, two-way cable
modems must also become widely available in other channels, such as through
personal computer manufacturers and through retail outlets. Currently, this
widespread availability has not yet occurred. In addition, these modems must be
easy for consumers to install themselves, rather than requiring a customer
service representative to perform the installation. If two-way cable modems do
not become quickly available in outlets other than through cable television
companies, or if they cannot be installed easily by consumers, it would be
difficult for us to attract large numbers of additional subscribers and our
business would be harmed.
OUR BROADBAND BUSINESS MAY BE IMPACTED BY CABLE UNBUNDLING PROPOSALS AND OTHER
GOVERNMENT REGULATION
Currently, our broadband services are not directly subject to regulations
of the Federal Communication Commission or any other federal, state or local
communications regulatory agency. However, changes in the regulatory environment
relating to the Internet, cable television or telecommunications markets which
could require regulatory compliance by us or which could impact our exclusivity
arrangements, ability to provide broadband services subscribers and revenues
include:
- The FCC or local agencies could require our cable partners to grant
competitors access to their cable systems. America Online, GTE,
MindSpring Enterprises, Inc., Consumers Union and other parties have
requested Congress, the Federal Communications Commission and state and
local authorities to require cable operators to provide Internet and
online service providers with unbundled access to their cable systems. If
we or our cable partners are classified as common carriers, or if
government authorities require third-party access to cable networks or
unaffiliated Internet service providers, our competitors may be able to
provide service over our cable partners' systems. The rates that our
cable partners charge for this third-party access, or for the @Home
Services, could also be subject to rate regulation or tariffing
requirements.
- Local governmental proceedings. Some local jurisdictions, including
Portland and Multnomah County, Oregon and Broward County, Florida, have
imposed third-party access requirements on AT&T and other cable companies
operating in those communities. The imposition of these requirements has
been challenged in Federal Courts. In June 1999, a U.S. District Court
upheld the third-party access requirement imposed on AT&T by Portland and
Multnomah County. This decision has been appealed to the U.S. Court of
Appeal for the Ninth Circuit. Numerous other local jurisdictions have
considered or are considering imposing similar third-party access
requirements and other municipalities may consider imposing similar
requirements in the future.
- Other litigation. In October 1999, GTE filed a lawsuit in a U.S. District
Court alleging violations of the federal antitrust laws. Although it is
too early to predict the outcome of this litigation, we could be forced
to pay damages, allow other service providers to utilize our network or
incur significant costs in defending this litigation. Any of these
outcomes could harm our business. In addition, others could initiate
litigation on similar legal theories in the future.
- Federal regulation. Regulatory changes that affect telecommunications
costs, limit usage of subscriber-related information or increase
competition from telecommunications companies could affect our pricing or
ability to market our broadband services successfully. For example,
reregulation of cable television rates may affect the speed at which our
cable partners upgrade their cable systems to carry our broadband
services.
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- Regulation by local franchise authorities. Many of our United States
cable partners' local cable affiliates have elected to classify the
provision of the @Home service as an additional cable service under their
local franchise agreements, and to pay franchise fees under those
agreements. Local franchise authorities may attempt to subject cable
systems to higher or different franchise fees, taxes or requirements in
connection with their distribution of the @Home service. There are
thousands of franchise authorities, and thus it would be difficult or
impossible for us or our cable partners to operate without a uniform set
of franchise requirements.
WE COULD LOSE SUBSCRIBERS TO, DISTRIBUTION RELATIONSHIPS FOR AND REVENUES FROM
OUR BROADBAND SERVICES TO OUR COMPETITORS
The markets for consumer and business broadband services are extremely
competitive, and we expect that competition will intensify in the future. Our
most direct competitors for broadband services include the following:
- Providers of cable-based Internet services. Time Warner Inc. and Media
One Group, which AT&T has agreed to acquire, have deployed high-speed
Internet access services over their local cable networks through their
own cable-based Internet service, Road Runner. We currently compete with
Road Runner to establish distribution arrangements with cable system
operators and we may compete for subscribers in the future if and when
our cable partners cease to be subject to their exclusivity obligations.
In addition, we compete with other providers of cable-based Internet
services, such as ISP Channel, Inc. and High Speed Access Corporation.
- Telecommunications providers. We compete with national long-distance and
local exchange carriers that offer high-speed, Internet access services
such as asymmetric digital subscriber line, known as DSL. Recently, these
services have been offered in a number of areas and at lower prices than
in the past. If the advanced services offered by these companies are
deregulated, this would further enhance the ability of these companies to
compete against our services.
- Internet and online service providers. We compete with Internet service
providers that provide basic Internet access services and with online
service providers such as America Online and other Internet portals and
online services that have announced broadband strategies, such as Yahoo!.
Many of our competitors and potential competitors have substantially
greater financial, technical and marketing resources, larger subscriber bases,
longer operating histories, greater name recognition and more established
relationships with advertisers and content and application providers than we do.
These competitors may be able to undertake more extensive marketing campaigns,
adopt more aggressive pricing policies and devote more resources to developing
Internet services or online content than us. We may not be able to compete
successfully against current or future competitors, and competitive pressures
could significantly harm our broadband subscriber base, our ability to renew and
enter into new distribution agreements and our revenues.
OUR DEPENDENCE ON OUR NETWORK TO PROVIDE OUR BROADBAND SERVICES EXPOSES US TO A
SIGNIFICANT RISK OF SYSTEM FAILURE
Our operations for our broadband services are dependent upon our ability to
support our highly complex network infrastructure and avoid damage from fires,
earthquakes, floods, power losses, telecommunications failures and similar
events. The occurrence of a natural disaster or other
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unanticipated problem at our network operations center or at a number of our
regional data centers could cause interruptions in our broadband services.
Additionally, failure of our cable partners or companies from which we obtain
data transport services to provide the data communications capacity that we
require, for example as a result of natural disaster, or operational disruption,
could cause interruptions in the services our broadband services. Any damage or
failure that causes interruptions in our network operations could harm our
business.
RISKS RELATED TO OUR RELATIONSHIPS WITH OUR CABLE PARTNERS
The success of our business depends on our relationships with our cable
partners, most of which have agreed to provide our broadband services on an
exclusive basis. We have also agreed not to provide a variety of Internet
services in the areas covered by our cable partners. Our agreements with our
cable partners are complex. Some of the risks associated with these
relationships are set forth below. For a summary of some of the key aspects of
these agreements, you should refer to our annual report on Form 10-K/A for the
year ended December 31, 1998.
WE DEPEND ON OUR CABLE PARTNERS TO UPGRADE TO THE TWO-WAY CABLE INFRASTRUCTURE
NECESSARY TO SUPPORT THE @HOME SERVICE; THE AVAILABILITY AND TIMING OF THESE
UPGRADES ARE UNCERTAIN
Transmission of our broadband services depends on the availability of
high-speed two-way hybrid fiber coaxial cable infrastructure. However, only a
portion of existing cable plant in the United States and in some international
markets has been upgraded to two-way hybrid fiber coaxial cable, and even less
is capable of high-speed two-way transmission. As of September 30, 1999,
approximately 30% of our North American cable partners' cable infrastructure was
capable of delivering the @Home service. Our cable partners have announced and
are implementing major infrastructure investments in order to deploy two-way
hybrid fiber coaxial cable. However, these investments have placed a significant
strain on the financial, managerial, operating and other resources of our cable
partners, most of which are already highly leveraged. Therefore, these
infrastructure investments have been, and we expect will continue to be, subject
to change, delay or cancellation. Furthermore, because of consolidation in the
cable television industry, as well as the sale or transfer of cable assets among
cable television operators, many cable companies have delayed upgrading
particular systems that they plan to sell or transfer. If these upgrades are not
completed in a timely manner, our broadband services may not be available on a
widespread basis and we may not be able to increase our subscriber base at the
rate we anticipate. Although our commercial success depends on the successful
and timely completion of these infrastructure upgrades, most of our cable
partners are under no obligation to upgrade systems or to introduce, market or
promote our broadband services. As has happened in the past, even if a cable
partner upgrades its cable infrastructure, the upgraded infrastructure may not
function properly, and therefore cause a delay in the availability of our
broadband services for particular areas. The failure of our cable partners to
complete these upgrades in a timely and satisfactory manner, or at all, would
prevent us from delivering broadband services and would significantly harm our
business.
OUR CABLE PARTNERS ARE NOT GENERALLY OBLIGATED TO CARRY OUR BROADBAND SERVICES,
AND THE EXCLUSIVITY OBLIGATIONS THAT PREVENT THEM FROM CARRYING COMPETING
SERVICES MAY BE TERMINATED
Most of our cable partners are subject to exclusivity obligations that
prohibit them from obtaining high-speed, greater than 128 kilobits per second,
residential consumer Internet services from any source other than us. However,
most of our cable partners are under no affirmative obligation to carry any of
our broadband services. Also, the exclusivity obligations of our principal cable
partners,
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AT&T, Comcast Corporation, Cox Communications, Inc. and Cablevision Systems
Corp., expire on June 4, 2002, and may be terminated sooner under some
circumstances, as follows:
- principal cable partners may terminate all their exclusivity obligations
upon a change in law that materially impairs some of their rights;
- Comcast or Cox may terminate all exclusivity obligations of our principal
cable partners at any time if there is a change of control of TCI that
results within 12 months in the incumbent TCI directors no longer
constituting a majority of TCI's board. AT&T, TCI, Comcast and Cox have
agreed, however, that AT&T's acquisition of TCI did not constitute a
change of control under the terms of the original agreement;
- Comcast or Cox may terminate the exclusivity provisions of our principal
cable partners if AT&T and its affiliates do not meet specified
subscriber penetration levels for the @Home service. On June 4, 1999, Cox
had this right, but Cox has agreed to waive it for 1999; and
- Comcast may terminate its own exclusivity obligations at any time if it
allows us to repurchase a portion of Comcast's equity interest in
Excite@Home. Comcast has informed us that it has entered into an
agreement with Microsoft Corporation under which Microsoft can require
Comcast to terminate its exclusivity obligations.
In consideration for Cox's agreement to waive its right to terminate
exclusivity as of June 4, 1999, changes were made to the corporate governance
provisions of our certificate of incorporation and bylaws. These changes
generally require board action to be approved by a majority of our board,
including the board representatives of AT&T and either Cox or Comcast. In
addition, as further consideration for Cox's waiver, AT&T agreed to increase its
subscriber acquisition goals for the twelve months following June 4, 1999 above
its current goal for that period.
If the exclusivity obligations of our cable partners are terminated, this
could significantly harm our business and cause an immediate drop in our stock
price. We and our cable partners are continuing to explore the relationships we
will have after our exclusivity obligations expire as well as possible strategic
alternatives to our current relationships.
WE DEPEND ON OUR CABLE PARTNERS TO PROMOTE OUR SERVICES AND OBTAIN NEW
SUBSCRIBERS
The rate at which we are able to obtain new subscribers depends not only on
the degree to which our cable partners upgrade their cable systems but also on
the level and effectiveness of the efforts made by our cable partners to promote
our services. Our cable partners have achieved different levels of subscriber
penetration. In Canada, for example, where our cable partners have high levels
of upgraded cable systems, and faced early competition from other providers of
high speed data services, we have relatively high levels of subscriber
penetration that exceed those in the United States. Among our principal U.S.
cable partners, AT&T, Cox and Comcast are actively promoting our services and
are beginning to increase their penetration rates. Cablevision, however, has
deployed our service to only a small number of subscribers and continues to
offer its own online service called Optimum Online in certain of its cable
systems. We cannot predict the rate at which our cable partners will add new
subscribers to our services. If our cable partners do not actively and
effectively promote our services, we will not be able to reach the level of
subscribers necessary to achieve a profitable business model.
WE ARE CONTROLLED BY AT&T, COX AND COMCAST
TCI controls approximately 57% of our voting power. AT&T owns TCI and
therefore controls this voting power. Currently, four of our eleven directors
are directors, officers or employees of TCI,
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AT&T or their affiliates. AT&T currently owns all 30,800,000 outstanding shares
of our Series B common stock, each of which carries ten votes per share. This
Series B common stock ownership gives AT&T the right to elect five Series B
directors, one of which is designated by Comcast and one of which is designated
by Cox. So long as AT&T owns at least 15,400,000 shares of our Series B common
stock and holds a majority of our voting power, our board may take action only
if approved by the board and by at least 75%, or four of the five, of our Series
B directors. As a result, corporate actions generally require the approval of
AT&T's three Series B directors and one, or in some cases both, of the directors
designated by Comcast and Cox. Therefore, Comcast and Cox, acting together, may
veto any board action.
We depend on a continuing cooperative relationship with AT&T, Cox, Comcast
and other large stockholders to take action that requires stockholder consent.
It is possible that AT&T's stockholders' objectives will diverge from what
management considers to be our optimum strategy.
WARRANTS ISSUED TO OUR CABLE PARTNERS MAY RESULT IN ADDITIONAL DILUTION TO OUR
STOCKHOLDERS
We have entered into agreements with Cablevision, Rogers Cablesystems
Limited, Shaw Cablesystems Ltd. and other cable partners under which we issued
warrants to purchase shares of our Series A common stock. Under these
agreements, warrants to purchase 21,127,745 shares of our Series A common stock
at an average price of $5.25 per share were exercisable as of September 30,
1999. To the extent that Cablevision, Rogers, Shaw or other cable partners
become eligible to and exercise their warrants, our stockholders would
experience substantial dilution.
We also may issue additional stock, or warrants to purchase stock, at
prices equal to or less than fair market value in connection with efforts to
expand distribution of the @Home service.
RISKS RELATED TO OUR NARROWBAND SERVICES
OUR NARROWBAND SERVICES COULD LOSE USERS, ADVERTISERS AND REVENUES TO
COMPETITORS
Our narrowband services compete with a number of companies both for users
and advertisers and, therefore, for revenues. We expect this competition will
intensify, particularly because there are few barriers to entry in this market.
These competitors include:
- Internet portal companies such as Disney's Go Network, Lycos, Netscape's
Netcenter and Yahoo!;
- online service providers such as America Online and Microsoft's MSN
service;
- large media companies such as CBS, NBC, Time Warner and USA Networks,
Inc., who have announced initiatives to develop web services or partner
with web companies; and
- providers of a wide variety of online information, entertainment and
community services such as services that are targeted to vertical markets
or electronic commerce services.
Many providers of Internet services have been entering into distribution
arrangements, co-branding arrangements, content arrangements and other strategic
partnering arrangements with ISPs, online service providers, providers of web
browsers, operators of high-traffic web sites and other businesses in an attempt
to increase traffic and page views, thereby making their web sites more
attractive to advertisers while also making it more difficult for consumers to
link to services. To the extent that our direct competitors or other web site
operators are able to enter into successful strategic relationships, these
competitors and web sites could experience increases in traffic and page views,
or the traffic and page views on our narrowband services could remain constant
or decline,
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either of which could have the effect of making these web sites appear more
attractive to advertisers and therefore could harm our business.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories in the Internet market, greater
name recognition, larger customer bases and significantly greater financial,
technical and marketing resources than us. These competitors may be able to
undertake more extensive marketing campaigns, adopt more aggressive pricing
policies and make more attractive offers to potential employees, distribution
partners, advertisers and content providers. Further, it is possible that our
competitors could develop search and retrieval services or other online services
that are equal or superior to ours or that achieve greater market acceptance
than our offerings.
The Internet in general, and our narrowband services specifically, also
must compete with traditional advertising media, such as print, radio and
television, for a share of advertisers' total advertising budgets. To the extent
that the Internet is not perceived as an effective advertising medium,
advertisers may be reluctant to devote a significant portion of their
advertising budgets to Internet advertising.
IF INTERNET USERS DO NOT CONTINUE TO USE INTERNET PORTAL SITES, OUR BUSINESS
COULD BE HARMED
The success of our Internet portal web sites is also dependent on Internet
users continuing to use "portal" web sites for their information needs. Internet
measurement services have reported that the number of unique users of Internet
portal sites has been decreasing in recent periods. If Internet users begin to
become less dependent on portal sites, and instead go directly to particular web
sites, our traffic levels could decrease, which could make our sites less
attractive to advertisers.
OUR SYSTEMS MAY NOT BE ABLE TO ACCOMMODATE INCREASES IN THE NUMBER OF USERS OF
OUR NARROWBAND SERVICES
Our web sites for the Excite Network are currently hosted and operated on a
computer network infrastructure separate from our broadband services. The Excite
Network must accommodate a high volume of traffic and deliver frequently-updated
information. The web sites for the Excite Network have in the past, and may in
the future, experience slower response times or other problems for a variety of
reasons. We also depend on third party information providers to provide updated
information and content for these services on a timely basis. The Excite Network
could experience disruptions or interruption in service due to the failure or
delay in the transmission or receipt of this information. In addition, the
Excite Network users of these services depend on Internet service providers,
online service providers and other web site operators for access to the Excite
Network. Each of them has experienced significant outages in the past, and could
experience outages, delays and other difficulties due to system failures
unrelated to our systems. These types of occurrences could cause users to
perceive the Excite Network as not functioning properly and therefore cause them
to use other services.
WE DEPEND ON SEVERAL THIRD-PARTY RELATIONSHIPS FOR USERS, ADVERTISERS AND
REVENUES
We depend on a number of third party relationships to provide users and
content for the Excite Network, including agreements for links to narrowband
services to be placed on high-traffic web sites and agreements for third parties
to provide content, games and e-mail for narrowband web sites. If these
relationships terminate and we are not able to replace them, we could lose users
or advertisers.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the Series A common stock
by the selling stockholders under this prospectus.
DIVIDEND POLICY
We have never paid any cash dividends on our capital stock. We anticipate
that we will continue to retain any earnings for use in the operation of our
business and we do not currently intend to pay dividends.
SELLING STOCKHOLDERS
The following table sets forth information with respect to the selling
stockholders and the shares of our Series A common stock that they may offer
under this prospectus. Except for the relationships described below, the selling
stockholders have not had any other position, office or other material
relationship with us or any of our predecessors or affiliates.
The share information provided in the table below is based on information
provided to us by the selling stockholders as of November 9, 1999. We calculated
beneficial ownership according to Rule 13d-3 of the Exchange Act as of this
date. Each selling stockholder beneficially owns less than 1% of our outstanding
Series A common stock, based on 347,454,806 shares of Series A common stock
outstanding as of October 31, 1999. We may update, amend or supplement this
prospectus from time to time to update the disclosure in this section. The
former stockholder of Narrative received his shares in connection with our
acquisition of Narrative Communications Corp. in December 1998. The former
stockholders of Webshots received their shares in connection with our
acquisition of Webshots Corporation in November 1999.
The selling stockholders may from time to time offer and sell any or all of
their shares that are registered under this prospectus. Because the selling
stockholders are not obligated to sell their shares, and because the selling
stockholders may also acquire publicly traded shares of our Series A common
stock, we cannot estimate how many shares of the selling stockholders will
beneficially own after this offering.
<TABLE>
<CAPTION>
SHARES SHARES THAT
BENEFICIALLY OWNED MAY BE
NAME BEFORE THE OFFERING OFFERED
---- ------------------- -----------
<S> <C> <C>
FORMER STOCKHOLDER OF NARRATIVE COMMUNICATIONS CORP.:
Hilmi Ozguc.......................................... 403,182 260,642
FORMER STOCKHOLDERS OF WEBSHOTS CORPORATION:
Andrew Laakmann...................................... 1,301,957 1,301,957
Danna Stuven......................................... 338,303 338,303
Alexis Rocherolle.................................... 205,033 205,033
Nicholas Adam Wilder................................. 205,033 205,033
WARRANTHOLDER:
First Data Corporation(1)............................ 3,220,000 2,300,000
---------- ---------
Total...................................... 5,673,508 4,610,968
========== =========
</TABLE>
- -------------------------
(1) Includes 2,300,000 shares subject to a warrant
21
<PAGE> 23
AGREEMENTS WITH FIRST DATA
iMALL Development and Marketing Agreements
When the merger agreement with iMALL was signed, iMALL and First Data
signed the First Amended and Restated Development and Marketing Agreement, which
is referred to as the First Agreement, and the Second Amended and Restated
Development and Marketing Agreement, which is referred to as the Second
Agreement. The First Agreement went into effect when it was replaced by the
Second Agreement.
Under the First Agreement, iMALL granted to First Data and its affiliates
(1) a perpetual, exclusive license to use the "FDMS gateway" (as described in
the agreement), and (2) a non-exclusive license during the term of the agreement
to use iMALL's electronic commerce tools and to license and market those tools
to third parties. In addition, iMALL must:
- operate the FDMS gateway;
- perform certain development activities;
- operate and host applicable iMALL Internet sites;
- promote First Data and its affiliates as a preferred provider of their
respective services, and subject to existing contractual commitments, as
the exclusive provider of on-line Internet accessible applications for
such services;
- not promote, nor permit its affiliates to promote, the services of any
third party constituting a merchant acquiring business;
- provide advertising opportunities to First Data, including advertising
space and links on iMALL's web sites and the opportunity to solicit
iMALL's merchants;
- grant First Data the exclusive right to develop, broker and process
private label or co-branded site-related transaction cards and share
equally in the revenues from the development and brokerage of such cards;
- provide its services so that the technology used is considered leading
technology relative to other shopping portals and Internet mall hosting
providers; and
- deploy a redundant system within the time period specified in the
agreement.
Under the First Agreement, First Data will:
- market iMALL's electronic commerce tools and the iMALL site, including
promoting iMALL as a preferred e-commerce provider in these marketing
efforts; and
- allow iMALL to use the gateway for purposes of meeting its obligations
set forth in the agreement and for such other purposes as the parties may
agree.
First Data will pay to iMALL (1) a monthly fee for each merchant that uses
iMALL's electronic commerce tools and the FDMS gateway, (2) a one time fee for
the development of each merchant site, and (3) a monthly hosting fee for
maintaining each merchant site. First Data and iMALL shall share certain
advertising revenues after threshold revenue amounts are met. First Data is
entitled to a preferred pricing relationship under the agreement.
22
<PAGE> 24
The Second Agreement replaced the First Agreement when the merger was
completed. It is similar to the First Agreement except that it takes into
account Excite@Home's ownership of iMALL. The Second Agreement permits the
rebranding of certain iMALL products for Excite@Home and provides for specified
joint advertising and promotional activities. The Second Agreement also:
- specifies that First Data's exclusive rights relating to transaction
cards are subject to existing obligations of iMALL and its affiliates as
of the effective date of the agreement and specifies that such
exclusivity will cease to the extent that First Data fails or elects not
to exercise its exclusive rights;
- modifies iMALL's redundant system obligations by extending the date by
which such obligation must be met;
- provides that First Data will not license iMALL's electronic commerce
tools to any third party reseller that is in the business of cable
distribution, and iMALL will not sell or license its electronic commerce
tools to any third party reseller that is a financial institution; and
- provides for certain Year 2000-related representations and warranties by
First Data.
Excite@Home Marketing Agreement
Excite@Home signed a Marketing Agreement with First Data that has a term of
ten years unless it is terminated. Under the Marketing Agreement, Excite@Home
will:
- promote through preferred placement on its store-building pages and @Work
portal, www.work.com, First Data and its affiliates as a preferred
provider of payment solution processing on behalf of merchants;
- give preferred placement to the First Data merchant virtual application
linking image in its store building pages and @Work portal;
- use commercially reasonable efforts to promote iMALL.com until its
retirement in accordance with the Second Agreement, the successor to
iMALL.com and the Excite Shopping Service;
- cooperate with First Data to approach merchants to promote First Data's
services;
- to the extent that First Data develops, license or acquires wallet,
authentication or future technologies, Excite@Home will in good faith
consider the terms and conditions under which it would promote such
technologies as a preferred solution;
- provide First Data with most favored pricing for advertising;
- promote and maintain the Excite@Home successor to the iMALL sites and
other related Excite@Home sites and products;
- subject to existing contractual prohibitions, promote an online bill
payment product called Transpoint within nine months following the
effective date of the agreement through a linking image at such locations
as the parties may agree; and
- guarantee iMALL's performance with respect to its obligations set forth
in the Second Agreement.
23
<PAGE> 25
Under the Marketing Agreement, First Data will:
- use commercially reasonable efforts to market iMALL's electronic commerce
tools;
- cooperate with Excite@Home to provide appropriate customer support for
the iMALL's electronic commerce tools; and
- use commercially reasonable efforts to encourage affiliates of First Data
to promote the successor to iMALL.com and the Excite Shopping Service.
Capacity Reservation Agreement
Excite@Home also entered into a Capacity Reservation Agreement with First
Data. This agreement requires Excite@Home to reserve sufficient resources to
build and host e-commerce enabled web sites. In each of the first three months
after the merger, if Excite@Home reserves resources for 33,333 web sites, First
Data must pay Excite@Home $1 million per month. In each of the following six
months, if Excite@Home reserves resources for 25,000 web sites, First Data will
pay $750,000 per month. In each of the following three months, if Excite@Home
reserves resources for 16,667 web sites, First Data will pay $500,000 per month.
In each case, these dollar amounts will be reduced by amounts paid by First Data
to iMALL during the same periods.
First Data Warrant
When the merger with iMALL was completed, Excite@Home issued to First Data
a warrant to purchase 2,300,000 shares of Series A common stock for $36.96 per
share. The warrant will be exercisable when issued and will expire on October
30, 2003.
Registration Rights Agreement
Excite@Home entered into a registration rights agreement with First Data.
This agreement requires Excite@Home to use its commercially reasonable efforts
to have the Securities and Exchange Commission declare effective a registration
statement registering the shares issuable under the First Data warrant. This
agreement also requires Excite@Home to keep the registration statement effective
for one year after the completion of merger.
PLAN OF DISTRIBUTION
Who may sell and applicable restrictions. The selling stockholders will be
offering selling all shares offered and sold under this prospectus.
Alternatively, the selling stockholders may from time to time offer the shares
through brokers, dealers or agents that may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders and/or the
purchasers of the shares for whom they may act as agent. In effecting sales,
broker-dealers that are engaged by the selling stockholders may arrange for
other broker-dealers to participate. The selling stockholders and any brokers,
dealers or agents who participate in the distribution of the securities may be
deemed to be underwriters, and any profits on the sale of the securities by them
and any discounts, commissions or concessions received by any broker, dealer or
agent might be deemed to be underwriting discounts and commissions under the
Securities Act. To the extent the selling stockholders may be deemed to be
underwriters, they may be subject to statutory liabilities, including, but not
limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under
the Exchange Act.
24
<PAGE> 26
Manner of sales. The selling stockholders will act independently of us in
making decisions with respect to the timing, manner and size of each sale. Sales
may be made over the Nasdaq National Market or the over-the-counter market. The
shares may be sold at then prevailing market prices, at prices related to
prevailing market prices or at negotiated prices. The selling stockholders may
also resell all or a portion of the shares in open market transactions in
reliance upon Rule 144 under the Securities Act, provided that the shares meet
the criteria and conform to the requirements of this rule. The selling
stockholders may decide not to sell any of the shares offered under this
prospectus, and they may transfer, devise or gift these shares by other means.
The shares may be sold according to one or more of the following methods:
- a block trade in which the broker or dealer so engaged will attempt to
sell the securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by the broker or
dealer for its account as allowed under this prospectus;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
- an exchange distribution under the rules of the exchange;
- face-to-face transactions between sellers and purchasers without a
broker-dealer; and
- by writing options.
Some persons participating in this offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the securities, including
the entry of stabilizing bids or syndicate covering transactions or the
imposition of penalty bids. The selling stockholders and any other person
participating in a distribution will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder including Regulation M.
This regulation may limit the timing of purchases and sales of any of the
securities by the selling stockholders and any other person. The
anti-manipulation rules under the Exchange Act may apply to sales of securities
in the market and to the activities of the selling stockholders and their
affiliates. Furthermore, Regulation M of the Exchange Act may restrict the
ability of any person engaged in the distribution of the securities to engage in
market-making activities with respect to the particular securities being
distributed for a period of up to five business days before the distribution.
All of the foregoing may affect the marketability of the securities and the
ability of any person or entity to engage in market-making activities with
respect to the securities.
Hedging and other transactions with broker-dealers. In connection with
distributions of the securities, the selling stockholders may enter into hedging
transactions with broker-dealers. In connection with these transactions,
broker-dealers may engage in short sales of the registered securities in the
course of hedging the positions they assume with selling stockholders. The
selling stockholders may also sell securities short and redeliver the securities
to close out short positions. The selling stockholders may also enter into
option or other transactions with broker-dealers which require the delivery to
the broker-dealer of the registered securities. The broker-dealer may then
resell or transfer these securities under this prospectus. A selling stockholder
may also loan or pledge the registered securities to a broker-dealer and the
broker-dealer may sell the securities so loaned or, upon a default, the
broker-dealer may effect sales of the pledged securities under this prospectus.
Prospectus delivery. Because selling stockholders may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act, they
will be subject to the prospectus delivery
25
<PAGE> 27
requirements of the Securities Act. At any time a particular offer of the
securities is made, a revised prospectus or prospectus supplement, if required,
will be distributed which will set forth:
- the name of the selling stockholder and of any participating
underwriters, broker-dealers or agents;
- the aggregate amount and type of securities being offered;
- the price at which the securities were sold and other material terms of
the offering;
- any discounts, commissions, concessions and other items constituting
compensation from the selling; stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers; and
- that the participating broker-dealers did not conduct any investigation
to verify the information in this prospectus or incorporated in this
prospectus by reference.
The prospectus supplement or a post-effective amendment will be filed with
the Securities and Exchange Commission to reflect the disclosure of additional
information with respect to the distribution of the securities. In addition, if
we receive notice from a selling stockholder that a donee or pledgee intends to
sell more than 500 shares of Series A common stock, a supplement to this
prospectus will be filed.
Expenses associated with registration. We have agreed to pay the expenses
of registering the shares under the Securities Act, including registration and
filing fees, printing and duplication expenses, administrative expenses and
legal and accounting fees. Each selling stockholder will pay its own brokerage
and legal fees, if any.
Suspension of this offering. We may suspend the use of this prospectus if
we learn of any event that causes this prospectus to include an untrue statement
of a material fact or omit to state a material fact required to be stated in the
prospectus or necessary to make the statements in the prospectus not misleading
in the light of the circumstances then existing. If this type of event occurs, a
prospectus supplement or post-effective amendment, if required, will be
distributed to each selling stockholder.
LEGAL MATTERS
The validity of the issuance of the shares of Series A common stock offered
under this prospectus will be passed upon for us by Fenwick & West LLP, Two Palo
Alto Square, Palo Alto, California 94306.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements in our annual report on Form 10-K/A for the year ended
December 31, 1998, as amended, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our consolidated financial statements are incorporated by reference
in reliance on the report of Ernst & Young LLP given on their authority as
experts in accounting and auditing.
The financial statements of Narrative incorporated in this prospectus by
reference to the audited historical financial statements included as Exhibit
99.01 of our Form 8-K/A filed on February 18,
26
<PAGE> 28
1999 have been incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on their authority as experts in auditing
and accounting.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act relating
to future events or financial results. These forward-looking statements include
statements indicating that we believe, we expect or we anticipate that events
may occur or trends may continue, and similar statements relating to future
events or financial results. These forward-looking statements are subject to
material risks and uncertainties as indicated under the caption "Risk Factors."
Actual results could vary materially as a result of a number of factors
including those disclosed in "Risk Factors" and elsewhere in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
The following documents that we have filed with the Securities and Exchange
Commission are incorporated into this prospectus by reference:
- the registration statement on Form S-3 of which this prospectus is a
part, and the exhibits filed with this registration statement and
incorporated into the registration statement by reference
- our annual report on Form 10-K/A for the fiscal year ended December 31,
1998, as amended on March 31, 1999 and on April 27, 1999
- the registration of our Series A common stock on Form 8-A filed on June
13, 1997
- all other reports filed under Section 13(a) or 15(d) of the Exchange Act
since December 31, 1998, including: (1) our quarterly reports on Form
10-Q for the fiscal quarters ended March 31, June 30 and September 30,
1998, each as amended on February 8, 1999; (2) our quarterly reports on
Form 10-Q for the quarters ended March 31, June 30 and September 30,
1999; (3) our current report on Form 8-K filed on January 14, 1999, as
amended on February 19, 1999; (4) our two current reports on Form 8-K
filed on January 21, 1999; (5) our current report on Form 8-K filed on
February 19, 1999; (6) our current report on Form 8-K filed on April 8,
1999; (7) our current report on Form 8-K filed on June 14, 1999, as
amended on August 13, 1999; (8) our current report on Form 8-K filed on
August 2, 1999; and (9) our current report on Form 8-K filed on October
27, 1999.
- all other information that we file with the Commission under to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus and before the termination of this offering.
To the extent that any statement in this prospectus is inconsistent with
any statement that is incorporated by reference, the statement in this
prospectus shall control. The incorporated statement shall not be deemed, except
as modified or superceded, to constitute a part of this prospectus or the
registration statement.
Because we are subject to the informational requirements of the Exchange
Act, we file reports and other information with the Commission. Reports,
registration statements, proxy and information statements and other information
that we have filed can be inspected and copied at the public
27
<PAGE> 29
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain copies of this material
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at rates prescribed by the Commission. The public may
obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission also maintains a World Wide Web
site that contains reports, proxy and information statements and other
information that is filed electronically with the Commission. This web site can
be accessed at http://www.sec.gov.
We have filed with the Commission a registration statement on Form S-3
under the Securities Act with respect to the Series A common stock offered under
this prospectus. This prospectus does not contain all of the information in the
registration statement, parts of which we have omitted, as allowed under the
rules and regulations of the Commission. You should refer to the registration
statement for further information with respect to us and our Series A common
stock. Statements contained in this prospectus as to the contents of any
contract or other document are not necessarily complete and, in each instance,
we refer you to the copy of each contract or document filed as an exhibit to the
registration statement. Copies of the registration statement, including
exhibits, may be inspected without charge at the Commission's principal office
in Washington, D.C., and you may obtain copies from this office upon payment of
the fees prescribed by the Commission.
We will furnish without charge to each person to whom a copy of this
prospectus is delivered, upon written or oral request, a copy of the information
that has been incorporated by reference into this prospectus (except exhibits,
unless they are specifically incorporated by reference into this prospectus).
You should direct any requests for copies to At Home Corporation, 425 Broadway
Street, Redwood City, California 94063, Attention: David G. Pine, Vice President
and General Counsel, telephone: (650) 569-5000.
28
<PAGE> 30
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[EXCITE/@HOME LOGO]
AT HOME CORPORATION
4,610,968 SHARES OF
SERIES A COMMON STOCK
-------------------------
PROSPECTUS
November , 1999
-------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. THE SELLING STOCKHOLDERS ARE OFFERING TO SELL, AND
SEEKING OFFERS TO BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS
AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF
DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF COMMON STOCK.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 31
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities being
registered hereby. Normal commission expenses and brokerage fees are payable
individually by the selling stockholders. All amounts are estimated except the
Securities and Exchange Commission registration fee and Nasdaq National Market
listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 51,299
Nasdaq National Market listing fee.......................... 35,000
Accounting fees and expenses................................ 10,000
Legal fees and expenses..................................... 30,000
Miscellaneous............................................... 3,701
-----------
Total............................................. $130,000.00
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors to the Registrant or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to the corporation or
its stockholders
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law
- under Section 174 of the Delaware General Corporation Law
- for any transaction from which the director derived an improper personal
benefit
As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's Certificate of Incorporation further provides:
- for mandatory indemnification, to the fullest extent permitted by
applicable law, for any person who is or was a director or officer, or is
or was serving at the request of the Registrant as a director, officer,
employee or agent of another corporation or of a partnership, joint
venture, trust, enterprise or nonprofit entity, including service with
respect to employee benefit plans, against all liability and loss
suffered and expenses (including attorneys' fees) reasonably incurred by
this person
- that the Registrant's obligation to indemnify any person who was or is
serving at the Registrant's request as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust,
enterprise or nonprofit entity must be reduced by any amount the person
may collect as indemnification from the other corporation, partnership,
joint venture, trust, enterprise or nonprofit entity
- that the Registrant must advance to all indemnified parties the expenses
(including attorneys' fees) incurred in defending any proceeding provided
that indemnified parties (if they are directors or officers) must provide
the Registrant an undertaking to repay the advances if indemnification is
determined to be unavailable
II-1
<PAGE> 32
- that the rights conferred in the Certificate of Incorporation are not
exclusive
- that the Registrant may not retroactively amend the Certification of
Incorporation provisions relating to indemnity
The indemnification provision in the Registrant's Certificate of
Incorporation and the Indemnification Agreements entered into between the
Registrant and each of its directors and executive officers may be sufficiently
broad to permit indemnification of the Registrant's directors and officers for
liabilities arising under the Securities Act. The Registrant has also obtained
directors' and officers' liability insurance. The following documents are
incorporated by reference:
<TABLE>
<CAPTION>
DOCUMENT
--------
<S> <C>
1 The Registrant's Fifth Amended and Restated Certificate of
Incorporation filed May 28, 1999 (incorporated by reference
to Exhibit 4.01 to the Registrant's registration statement
on Form S-8, File No. 333-79883, filed with the Commission
on June 3, 1999).
2 Form of Indemnification Agreement entered into by the
Registrant with each of its directors and executive officers
(incorporated by reference to Exhibit 10.09 to the
Registrant's registration statement on Form S-1, File No.
333-27323, declared effective July 11, 1997).
</TABLE>
ITEM 16. EXHIBITS.
The following exhibits are filed with this registration statement or
incorporated into this registration statement by reference:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
3.01 The Registrant's Fifth Amended and Restated Certificate of
Incorporation filed with the Delaware Secretary of State on
May 28, 1999 (incorporated by reference to Exhibit 4.01 to
the Registrant's registration statement on Form S-8, File
No. 333-79883, filed with the Commission on June 3, 1999).
3.02 The Registrant's Second Amended and Restated Bylaws as
adopted on July 16, 1997 (incorporated by reference to
Exhibit 3.05 to the Registrant's registration statement on
Form S-1, File No. 333-27323, declared effective by the
Commission on July 11, 1997).
4.01 Form of certificate of the Registrant's Series A Common
Stock (incorporated by reference to Exhibit 4.05 to the
Registrant's registration statement on Form S-1, File No.
333-27323, declared effective by the Commission on July 11,
1997).
4.02 Amended and Restated Stockholders' Agreement, dated August
1, 1996, by and among the Registrant and the parties
indicated therein, as amended on May 15, 1997 (incorporated
by reference to Exhibit 4.04 to the Registrant's
registration statement on Form S-1, File No. 333-27323,
declared effective July 11).
5.01 Opinion of Fenwick & West LLP regarding the legality of the
shares of Series A common stock being registered.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of Ernst & Young LLP, Independent Auditors.
23.03* Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
24.01 Power of attorney (see pg. II-5 of this registration
statement).
</TABLE>
- ------------------------
* To be filed by amendment.
II-2
<PAGE> 33
ITEM 17. UNDERTAKINGS.
The Registrant undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(a) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(c) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to the information in the registration statement;
provided, however, that paragraphs (1)(a) and (1)(b) above do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by Registrant pursuant to Section 13 or Section 15(d) of
the Exchange Act that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered in the
registration statement, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of those securities.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered in the
registration statement, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of those securities.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions discussed in Item 6
hereof, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission this indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. If a claim for indemnification against these liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by the director,
officer or controlling person in connection with the securities being
registered under this registration statement, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of this
issue.
II-3
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
At Home Corporation, certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Redwood City, State of California, on this 16th day of
November, 1999.
AT HOME CORPORATION
By: /s/ THOMAS A. JERMOLUK
------------------------------------
Thomas A. Jermoluk
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
Each individual whose signature appears below constitutes and appoints
Thomas A. Jermoluk, Kenneth A. Goldman and David G. Pine, and each of them, his
true and lawful attorneys-in-fact and agents, each with the power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, and to sign any registration statement for the
same offering covered by this registration statement that is to be effective
upon filing pursuant to Rule 415 promulgated under the Securities Act of 1933,
and all post-effective amendments thereto, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ THOMAS A. JERMOLUK Chairman and November 16, 1999
- ----------------------------------------------------- Chief Executive Officer
Thomas A. Jermoluk
PRINCIPAL FINANCIAL OFFICER:
/s/ KENNETH A. GOLDMAN Senior Vice President and November 16, 1999
- ----------------------------------------------------- Chief Financial Officer
Kenneth A. Goldman
PRINCIPAL ACCOUNTING OFFICER:
/s/ ROBERT A. LERNER Corporate Controller November 16, 1999
- -----------------------------------------------------
Robert A. Lerner
</TABLE>
II-4
<PAGE> 35
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
ADDITIONAL DIRECTORS:
/s/ WILLIAM R. HEARST III Director November 16, 1999
- -----------------------------------------------------
William R. Hearst III
Director
- -----------------------------------------------------
C. Michael Armstrong
/s/ GEORGE BELL Director November 16, 1999
- -----------------------------------------------------
George Bell
/s/ L. JOHN DOERR Director November 16, 1999
- -----------------------------------------------------
L. John Doerr
/s/ JOHN C. MALONE Director November 16, 1999
- -----------------------------------------------------
John C. Malone
Director
- -----------------------------------------------------
John C. Petrillo
/s/ BRIAN L. ROBERTS Director November 16, 1999
- -----------------------------------------------------
Brian L. Roberts
/s/ JAMES R. SHAW Director November 16, 1999
- -----------------------------------------------------
James R. Shaw
Director
- -----------------------------------------------------
David M. Woodrow
</TABLE>
II-5
<PAGE> 36
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
5.01 Opinion of Fenwick & West LLP regarding the legality of the
shares of Series A common stock being registered.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of Ernst & Young LLP, Independent Auditors.
23.03* Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
24.01 Power of attorney (see pg. II-4 of this registration
statement).
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE> 1
November 16, 1999
At Home Corporation
450 Broadway
Redwood City, California 94063
Gentlemen/Ladies:
At your request, we have examined the Registration Statement on Form S-3
(the "Registration Statement") to be filed by you with the Securities and
Exchange Commission (the "Commission") on or about November 12, 1999 in
connection with the registration under the Securities Act of 1933, as amended,
of an aggregate of 4,610,968 shares of your Series A Common Stock (the "Stock"),
all of which will be sold by certain selling stockholders (the "Selling
Stockholders").
In rendering this opinion, we have examined the following:
(1) your registration statement on Form 8-A filed with the Commission on
June 13, 1997 (File No. 000-22697), together with the order of
effectiveness issued by the Commission therefor on July 11, 1997;
(2) your Annual Report on Form 10-K/A for the year ended December 31,
1998, as amended on March 31, 1999 and on April 27, 1999;
(3) your Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30, 1999;
(4) your Current Reports on Form 8-K filed with the Commission on January
14, 1999, as amended on February 19, 1999; January 21, 1999; February
19, 1999; April 8, 1999; June 14, 1999, as amended on August 13, 1999;
August 2, 1999; and October 27, 1999;
(5) the Registration Statement, together with the exhibits filed as a part
thereof;
(6) the prospectus prepared in connection with the Registration Statement
(the "Prospectus");
(7) your Fifth Amended and Restated Certificate of Incorporation filed
with the Delaware Secretary of State on May 28, 1999 and your Second
Amended and Restated Bylaws, each of which are listed as exhibits to
the Registration Statement;
<PAGE> 2
November 16, 1999
Page 2
(8) the minutes of meetings and actions by written consent of the
stockholders and Board of Directors that are contained in your minute
books that are in our possession;
(9) summary reports from you confirming the number of shares of your
capital stock outstanding as of October 31, 1999 and the number of
options, warrants and any other rights to acquire shares of your
capital stock outstanding as of October 31, 1999; and
(10) a Management Certificate addressed to us and dated of even date
herewith executed by you containing certain factual and other
representations.
By telephone call to the offices of the Commission, we have confirmed the
continued effectiveness of your registration under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the timely filing by you of all
reports required to be filed by you pursuant to Rules 13, 14 and 15 promulgated
under the Exchange Act.
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity and completeness of all documents submitted
to us as originals, the conformity to originals and completeness of all
documents submitted to us as copies, the legal capacity of all natural persons
executing the same, the lack of any undisclosed termination, modification,
waiver or amendment to any document reviewed by us and the due authorization,
execution and delivery of all documents where due authorization, execution and
delivery are prerequisites to the effectiveness thereof.
As to matters of fact relevant to this opinion, we have relied solely upon
our examination of the documents referred to above and have assumed the current
accuracy and completeness of the information obtained from public officials and
records referred to above. We have made no independent investigation or other
attempt to verify the accuracy of any of such information or to determine the
existence or non-existence of any other factual matters; however, we are not
aware of any facts that would cause us to believe that the opinion expressed
herein is not accurate.
We are admitted to practice law in the State of California, and we express
no opinion herein with respect to the application or effect of the laws of any
jurisdiction other than the existing laws of the United States of America and
the State of California and (without reference to case law or secondary sources)
the existing Delaware General Corporation Law.
In connection with our opinion expressed below, we have assumed that, at or
prior to the time of the delivery of any shares of Stock, the Registration
Statement will have been declared effective under the Securities Act of 1933, as
amended, that the registration will apply to such shares of Stock and will not
have been modified or rescinded and that there will not have occurred any change
in law affecting the validity or enforceability of such shares of Stock.
Based upon the foregoing, it is our opinion that up to 4,610,968 shares of
Stock to be sold by the Selling Stockholders pursuant to the Registration
Statement, are or, in the case of shares
<PAGE> 3
November 16, 1999
Page 3
subject to warrants, upon the exercise of the warrants in accordance with the
terms thereof, will be legally issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us, if any, in the
Registration Statement, the Prospectus constituting a part thereof and any
amendments thereto.
This opinion speaks only as of its date and we assume no obligation to
update this opinion should circumstances change after the date hereof. This
opinion is intended solely for the your use as an exhibit to the Registration
Statement for the purpose of the above sale of the Stock and is not to be relied
upon for any other purpose.
Very truly yours,
FENWICK & WEST LLP
By: /s/ Jeffrey R. Vetter
------------------------
Jeffrey R. Vetter
<PAGE> 1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 333- ) and related Prospectus of At
Home Corporation for the registration of 4,610,968 shares of its Series A
common stock and to the incorporation by reference therein of our report dated
January 19, 1999, with respect to the consolidated financial statements of At
Home Corporation included in its Annual Report (Form 10-K) for the year ended
December 31, 1998, as amended, filed with the Securities and Exchange
Commission.
Walnut Creek, California
November 12, 1999
