AT&T puts Excite@Home in play

AT&T Corp. has put Excite@Home into play.

The company said Thursday afternoon it was exploring strategic alternatives concerning its Internet strategy as well as its ownership percentage in Excite@Home.

In a press release after the close of the stock market, AT&T (NYSE:T) said its discussions remained at a "very preliminary stage" and that management had not decided to proceed with any particular option.

AOL rumors swirling
AT&T did not name potential buyers, or specifically address the America Online rumors, which have centered on the idea that AT&T might be prepared to sell out to AOL (NYSE:AOL) and then buy back the @Home Network high-speed programming piece of the business.

"There is no assurance that any transaction will occur, and we do not intend to comment further unless and until we decide definitively to proceed with one or more alternatives, if any," the company said.

Still, that represented a 24-hour turnaround from AT&T's apparently official position, represented by one of its top executives.

Speaking with Reuters Wednesday evening prior to delivering a speech in Hartford, Conn., Leo Hindery, the president and chief executive of AT&T's broadband and Internet services, poured cold water on speculation that AT&T was considering jettisoning Excite@Home.

'Absolutely not'?
"Absolutely not," Hindery said. "There have been no discussions underway whatsoever ... I typically don't comment on things of that sort. But when it's absurd, I do."

Yet the market apparently believes there's fire where there's smoke. Investors drove up shares of Excite@Home (Nasdaq:ATHM) on Wednesday. The company's stock finished down two points on Thursday by the market's close, but immediately soared more than two points in after-hours trading.

The possibility of a deal involving an outright purchase by AOL was mentioned by John Segrich, an analyst with CIBC World Markets Corp., as a "likely scenario." He suggested that AOL might then resell the network operations back to AT&T, which would become the online provider's preferred network supplier.

That would presumably end the escalating battle being waged by AOL, which is demanding AT&T allow open access to its growing cable network.

No easy feat
But however much Wall Street likes the sound of a deal, it may still take some doing. The other owners of @Home include Cox Communications and Comcast, which must assent to any sale.

A spokesman for AOL said the company had no comment. Following the release of AT&T's statement, Excite@Home said it has "periodically explored" ways to maximize shareholder value. Like all companies in the Internet industry, we are continuously assessing various forms of strategic relationships," the company said. "There is no certainty that any transaction will occur and we will not comment further until we decide definitively to pursue any particular transaction, if any."