At Home to Buy Excite

While a marriage between search engine Excite and high-speed Net access provider At Home makes sense technologically, it may be less sound financially. The $6.7 billion deal announced Tuesday, in which At Home buys Excite in a stock swap, is supposed to attract advertisers and content providers to the cable-modem-based service providers. "They're buying it with stock valued way beyond reason," observes TIME technology editor Philip Elmer-DeWitt. "It's the Alice in Wonderland world of Internet stocks that bears no relation to the real world." At the close of business Friday, Excite had a market value of $3.5 billion -- just over half of what At Home will pay.

Despite the wild pricing -- which tops last month's $4.2 billion acquisition of Netscape by America Online -- the deal between the two Silicon Valley-based companies marks a trend in Internet mergers between access providers and the start-up pages of millions of users. Both Yahoo and Microsoft were reportedly attempting to buy Excite, the Web's sixth most popular destination, before At Home made the winning offer. With a world-class portal site, the acquisition may well give an edge to At Home over its closest competitor for cable-based Internet service, RoadRunner, for which Time Warner (parent company of TIME Daily) is the largest stockholder. By garnering the millions of users who turn to Excite before any other web page, At Home hopes to attract the open wallets of new advertisers and content providers. The company currently serves 330,000 subscribers with high-speed Internet access over cable television lines, but when execs close their eyes, they see millions getting their web pages along with TV programming -- and paying At Home a premium for it.