Description

At the core of any company is the product or a service. At the core of ATHM is a superior product: cable modem internet access which is up to 100 times faster than its competitors.

If you have ever tried the ATHM service you'll never go back to dial-up. There's lots of noise about which service is faster and lots of competition for the internet access market but once that barrier is overcome ATHM should rapidly increase its sales because it has a limited time monopoly for access to 32M homes.

Currrently only 6% of the 32M homes passed subscribe to ATHM's service.

ATHM has a monopoly (for a limited time) because it is partly owned by cable tv companies.

The book value is $18.29.

The price of the stock has declined 68% this year.

ATHM's 1.8 million subs grew at a 30% rate year over year and 21% sequentially for the last quarter.

Revenue for the last six months grew 57%.

Last Q the stock took another hit because the sub growth didn't meet the Street's expectations. The company attributed the problem to a cable modem shortage; a nice problem to have.

ATHM was also in a legal battle with AOL over something called "open access." Basically AOL wanted to use ATHM's network at a favorable rate. The Ninth Circuit ruled in favor of ATHM and that should not change on appeal to the Supreme Court.

ATHM suffers also, in part, in comparision to AOL's giant 24M sub base. The thing that gets lost in the battle is that ATHM has superior technology and a monopoly on 32 million homes. The growth potential going forward is huge.

Catalyst

ATHM has to market its service better. The key here is that AT&T holds a large percentage ownership in ATHM. T's stock has been battered this year. T knows how to market (e.g. TV ads, credit card, telemarketing).

T has a big incentive to boost the price of ATHM and its own share price. ATHM is critical to T because ATHM's business is growing so much faster than T's.

If ATHM could beat sub growth next Q that might help the Street realize that this is an asset rich company which is trading below book and is growing revenue at 57% rate (year over year) over the last six months and it hasn't begun to capture a decent share of its monopoly market.