<PAGE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               ----------------

                                   FORM 10-Q

                               ----------------

(MARK ONE)

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
     OF 1934

     for the quarterly period ended March 31, 2001.

                                       OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     for the transition period from            to            .

                         Commission File No. 000-22697

                               ----------------

                              AT HOME CORPORATION
           (Exact name of the Registrant as specified in its charter)

<TABLE>
<S>                                       <C>
                Delaware                                    77-0408542
    (State or other jurisdiction of                      (I.R.S. Employer
     incorporation or organization)                   Identification Number)

          450 Broadway Street
        Redwood City, California                              94063
(Address of principal executive offices)                    (Zip Code)
</TABLE>

                                 (650) 556-5000
            (The Registrant's telephone number, including area code)

  Former name, former address, and former year, if changed since last report:

                                Not applicable.

                               ----------------

   Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  YES [X] NO [_]

<TABLE>
<CAPTION>
                                                                      As of
                                                                  April 30, 2001
                                                                  --------------
<S>                                                               <C>
Number of shares of Series A Common Stock outstanding............  321,789,397
Number of shares of Series B Common Stock outstanding............   86,595,578
</TABLE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                              AT HOME CORPORATION

       QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2001

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----

                         PART I--FINANCIAL INFORMATION

 <C>     <S>                                                               <C>
 Item 1. Condensed Consolidated Financial Statements--Unaudited:

         Condensed Consolidated Balance Sheets as of March 31, 2001 and
         December 31, 2000..............................................     3

         Condensed Consolidated Statements of Operations for the Three
         Months Ended March 31, 2001 and 2000...........................     4

         Condensed Consolidated Statements of Cash Flows for the Three
         Months Ended March 31, 2001 and 2000...........................     5

         Notes to Condensed Consolidated Financial Statements...........     6

 Item 2. Management's Discussion and Analysis of Financial Condition and
         Results of Operations..........................................    13

 Item 3. Quantitative and Qualitative Disclosures About Market Risk.....    42

                           PART II--OTHER INFORMATION

 Item 1. Legal Proceedings..............................................    43

 Item 2. Changes in Securities and Use of Proceeds......................    43

 Item 3. Defaults Upon Senior Securities................................    43

 Item 4. Submission of Matters to a Vote of Security Holders............    44

 Item 5. Other Information..............................................    44

 Item 6. Exhibits and Reports on Form 8-K...............................    44

 Signatures..............................................................   45
</TABLE>

                                       2
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

                              AT HOME CORPORATION

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                (In thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                       March 31,   December 31,
                                                         2001          2000
                                                      -----------  ------------
                                                      (Unaudited)      (*)
<S>                                                   <C>          <C>
                       ASSETS
Current assets:
 Cash and cash equivalents........................... $    60,598  $    64,508
 Restricted cash.....................................      29,466       34,139
 Short-term investments..............................      14,469      102,115
                                                      -----------  -----------
   Total cash, cash equivalents and short-term
    investments......................................     104,533      200,762
 Accounts receivable, net............................      38,037       65,899
 Accounts receivable--related parties................      64,258       54,126
 Other current assets................................      45,180       42,626
                                                      -----------  -----------
   Total current assets..............................     252,008      363,413
Property, equipment and improvements, net............     406,581      366,127
Investments in affiliated companies..................      33,645       35,032
Other investments....................................      39,803       73,628
Distribution agreements, net.........................     216,040      239,357
Goodwill and other acquired intangible assets, net...     211,385      908,788
Other assets.........................................     120,996      120,355
                                                      -----------  -----------
   Total assets...................................... $ 1,280,458  $ 2,106,700
                                                      ===========  ===========
        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable.................................... $    58,676  $    65,060
 Accounts payable -- related parties.................       7,209       10,892
 Accrued compensation and related expenses...........      19,010       21,940
 Deferred revenue....................................      41,391       40,381
 Other accrued liabilities...........................     122,644      101,826
 Current portion of capital lease and other
  obligations........................................      78,996       70,258
                                                      -----------  -----------
   Total current liabilities.........................     327,926      310,357
Convertible notes and debentures.....................     745,386      743,525
Capital lease and other obligations, less current
 portion.............................................      76,470       85,904
Other liabilities....................................      11,603       10,397
Commitments and contingencies
Stockholders' equity:
 Convertible preferred stock, $0.01 par value,
  Authorized shares -- 9,650,000:
   Issued and outstanding shares--7,022 in 2001 and
    7,621 in 2000....................................     270,592      286,208
 Common stock, $0.01 par value, Authorized shares--
  1,110,000,000:
   Issued and outstanding shares--407,491,093 in 2001
    and 405,362,314 in 2000..........................   9,831,060    9,809,893
 Deferred compensation...............................     (28,557)     (34,070)
 Accumulated other comprehensive income..............       3,181       19,085
 Accumulated deficit.................................  (9,957,203)  (9,124,599)
                                                      -----------  -----------
    Total stockholders' equity.......................     119,073      956,517
                                                      -----------  -----------
    Total liabilities and stockholders' equity....... $ 1,280,458  $ 2,106,700
                                                      ===========  ===========
</TABLE>
--------
(*) The condensed consolidated balance sheet as of December 31, 2000 has been
    derived from audited financial statements as of that date but does not
    include the information and footnotes required by generally accepted
    accounting principles for complete financial statements.

  The accompanying notes are an integral part of these condensed consolidated
                              financial statements

                                       3
<PAGE>

                              AT HOME CORPORATION

          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                     (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                                March 31,
                                                           --------------------
                                                             2001       2000
                                                           ---------  ---------
<S>                                                        <C>        <C>
Revenues(/1/):
  Consumer access........................................  $  75,360  $  41,977
  Commercial services....................................     15,546     13,467
  Media/advertising......................................     45,057     76,223
  International..........................................      6,830      6,396
                                                           ---------  ---------
    Total revenues.......................................    142,793    138,063
Operating costs(/2/):
  Cost of services and products..........................     92,634     57,239
  Product development and engineering....................     29,405     20,975
  Sales and marketing....................................     61,705     56,926
  General and administrative.............................     17,402     10,724
  Restructuring charge...................................     17,063        --
  Cost and amortization of distribution agreements.......     24,653     93,965
  Costs and amortization of goodwill, intangible assets,
   deferred compensation and other acquisition-related
   amounts...............................................    102,116    573,133
  Write-down of goodwill, other intangible assets and
   other assets..........................................    600,073        --
                                                           ---------  ---------
    Total operating costs................................    945,051    812,962
                                                           ---------  ---------
Loss from operations.....................................   (802,258)  (674,899)
Interest and other income (expense), net.................     (3,296)     3,193
Write-down of other investments..........................    (13,380)        --
Equity share of losses of affiliated companies...........    (13,670)    (4,815)
                                                           ---------  ---------
Net loss.................................................  $(832,604) $(676,521)
                                                           =========  =========
Net loss per share--basic and diluted....................  $   (2.05) $   (1.75)
                                                           =========  =========
Shares used in per share computation--basic and diluted..    406,203    387,644
                                                           =========  =========
--------
(/1/Revenue)from related parties.........................  $  10,572  $  12,094
                                                           =========  =========
(/2/Depreciation)and amortization included in operating
    costs, excluding amortization of distribution
    agreements and acquisition-related amounts...........  $  35,372  $  19,589
                                                           =========  =========
</TABLE>

  The accompanying notes are an integral part of these condensed consolidated
                              financial statements

                                       4
<PAGE>

                              AT HOME CORPORATION

          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                              March 31,
                                                         --------------------
                                                           2001       2000
                                                         ---------  ---------
<S>                                                      <C>        <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net loss................................................ $(832,604) $(676,521)
Adjustments to reconcile net loss to cash used in
 operating activities:
 Depreciation and amortization..........................    35,117     19,334
 Amortization of distribution agreements................    24,653     23,217
 Cost of distribution agreements........................       --      70,748
 Amortization of deferred and other stock-based
  compensation..........................................     5,513      5,159
 Amortization of goodwill and other intangible assets...    96,698    567,348
 Write-down of goodwill, other intangible assets and
  other assets..........................................   600,073        --
 Write-down of other investments........................    13,380        --
 Accretion of discount on convertible debentures........     2,484      2,394
 Equity share of losses of affiliated companies.........    13,670      4,815
 Changes in assets and liabilities:
   Accounts receivable..................................    17,730     (6,548)
   Other assets.........................................    (6,771)   (13,615)
   Accounts payable.....................................    (9,995)     2,137
   Accrued liabilities..................................    17,519      7,189
   Deferred revenues....................................      (412)       249
   Other long-term liabilities..........................     1,206        998
                                                         ---------  ---------
Cash provided by (used in) operating activities.........   (21,739)     6,904
                                                         ---------  ---------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Purchases of short-term investments.....................       --     (65,009)
Sales and maturities of short-term investments..........    87,646     64,915
Purchases of other investments..........................    (1,250)   (16,600)
Sales of other investments..............................     7,116      9,332
Net purchases of property, equipment and improvements...   (53,874)   (41,867)
Payments under backbone agreement.......................       --      (6,030)
Investment in joint ventures............................   (10,862)   (10,615)
Business combinations, net of cash received.............       --         941
                                                         ---------  ---------
Cash provided by (used in) investing activities.........    28,776    (64,933)
                                                         ---------  ---------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Proceeds from issuance of common stock, net of
 repurchases............................................     5,118     46,967
Payments on capital lease obligations...................   (20,738)   (11,973)
                                                         ---------  ---------
Cash provided by (used in) financing activities.........   (15,620)    34,994
                                                         ---------  ---------
Net decrease in cash and cash equivalents...............    (8,583)   (23,035)
Cash and cash equivalents, beginning of period
 (including restricted cash of $34,139 in 2001 and $988
 in 2000)............................................... $  98,647  $ 224,548
                                                         ---------  ---------
Cash and cash equivalents, end of period (including
 restricted cash of $29,466 in 2001 and $1,135 in
 2000).................................................. $  90,064  $ 201,513
                                                         =========  =========
SUPPLEMENTAL DISCLOSURES
 Interest paid.......................................... $   3,972  $   1,732
                                                         =========  =========
 Acquisition of equipment under capital leases.......... $  20,042  $  44,131
                                                         =========  =========
 Warrants to purchase Series A common stock earned by
  cable partners and capitalized as distribution
  agreements............................................ $     336  $  (2,462)
                                                         =========  =========
 Conversion of preferred stock to common stock.......... $  15,616  $  40,851
                                                         =========  =========
 Mergers and acquisitions:
   Common and preferred stock issued and options and
    warrants exercisable for common stock assumed....... $     --   $ 139,826
                                                         =========  =========
   Liabilities assumed.................................. $     --   $   2,287
                                                         =========  =========
</TABLE>

  The accompanying notes are an integral part of these condensed consolidated
                              financial statements

                                       5
<PAGE>

                              AT HOME CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Summary of Significant Accounting Policies and Certain Other Items

Significant Accounting Policies

Basis of Presentation

   The unaudited condensed consolidated financial statements include the
accounts of At Home Corporation and its consolidated subsidiaries, all of which
are wholly owned. All significant intercompany transactions and balances have
been eliminated in consolidation. Investments in entities owned 20% or more but
less than majority owned and not otherwise controlled by us are accounted for
under the equity method and presented in the consolidated balance sheets as
investments in affiliated companies. The unaudited condensed consolidated
financial statements reflect all adjustments consisting of normal recurring
accruals, which are, in the opinion of management, necessary for a fair
presentation of the interim periods presented. The results of operations for
the three months ended March 31, 2001 are not necessarily indicative of the
results to be expected for any subsequent period. Certain information and
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the Securities and Exchange Commission's rules and regulations. The
unaudited condensed consolidated financial statements and notes included herein
should be read in conjunction with our audited consolidated financial
statements and notes included in our annual report on Form 10-K for the year
ended December 31, 2000, as filed with the Securities and Exchange Commission
on April 2, 2001.

Reclassifications

   Certain reclassifications have been made to previously reported amounts in
the consolidated financial statements in order to conform to the current
presentation.

Effect of New Accounting Standards

   On February 14, 2001, the FASB issued a limited revision of its September 7,
1999 Exposure Draft, "Business Combinations and Intangible Assets", that
proposes to significantly change the accounting for goodwill acquired in a
purchase business combination. Under the revised proposal, goodwill would not
be amortized but would be reviewed for impairment, using a complex methodology
different from the original proposal, when an event occurs indicating the
potential for impairment. Goodwill impairment charges would be presented as a
separate line item within the operating section of the income statement. The
nonamortization approach would apply to previously recorded goodwill as well as
goodwill arising from acquisitions completed after the application of the new
standard. Amortization of the remaining book value of goodwill would cease and
the new impairment-only approach would apply. The FASB expects to release the
final statement in June 2001. The provisions of the proposed statement are to
be applied at the beginning of the first fiscal quarter following its issuance.

Calculation of Net Loss Per Share

   Basic and diluted net loss per share is computed using the weighted average
number of common shares outstanding during the period. Since we have a net loss
for all periods presented, net loss per share on a diluted basis is equivalent
to basic net loss per share because the effect of converting outstanding stock
options, warrants, common stock subject to repurchase, convertible debt,
preferred stock and other common stock equivalents would be anti-dilutive.

                                       6
<PAGE>

   The computation of basic and diluted net loss per share is as follows for
the periods indicated (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               March 31,
                                                          --------------------
                                                            2001       2000
                                                          ---------  ---------
   <S>                                                    <C>        <C>
   Net loss.............................................  $(832,604) $(676,521)
                                                          =========  =========
   Weighted average shares of common stock outstanding..    406,707    390,213
   Less: weighted average shares of common stock subject
    to repurchase.......................................       (504)    (2,569)
                                                          ---------  ---------
   Shares used in per share calculations................    406,203    387,644
                                                          =========  =========
   Net loss per share--basic and diluted................  $   (2.05) $   (1.75)
                                                          =========  =========
</TABLE>

Segment Reporting

   Our key operating segments are organized around our customers and services
and aggregated into the reported business segments based on how our management
organizes, manages and internally reports our revenues. Key operating segments
and the reported business segments they were aggregated into as of March 31,
2001 were: (1) Consumer Access, which includes the @Home service, premium
broadband services, customers care and set-top development; (2) Commercial
Services, which includes the @Work service and e-commerce applications; (3)
Media/Advertising, which includes the Excite, Bluemountain.com and Webshots
narrowband content services, broadband content services, and targeted and other
advertising services provided by MatchLogic; and (4) International, which
provides our broadband and narrowband services in Europe, Australia and Japan.
Information used by our key operating decision makers (consisting of our
executive management team) in reviewing operations and in allocating resources
includes revenue for each key operating segment. Information such as assets and
liabilities are not produced internally for each key operating segment.
Although we allocate some specific operating costs to each key operating
segment, which results in a partial measure of loss from operations and net
loss, a significant portion of operating costs such as network operations and
engineering are not allocated to some of the segments, and therefore our key
operating decision makers have not utilized this partial financial information
in segment format for the purpose of reviewing operations and allocating
resources. In addition, we have corporate marketing, corporate development,
general and administrative, and other operations that generate no revenues and
are not part of a key operating segment.

   Our reportable segments have changed from prior years, and the 2000
information has been restated accordingly. The following represents information
for our reported business segments for the periods indicated (in thousands):

<TABLE>
<CAPTION>
                                                                Three Months
                                                               Ended March 31,
                                                              -----------------
                                                                2001     2000
                                                              -------- --------
   <S>                                                        <C>      <C>
   Revenues:
     Consumer Access......................................... $ 75,360 $ 41,977
     Commercial Services.....................................   15,546   13,467
     Media/Advertising.......................................   45,057   76,223
     International...........................................    6,830    6,396
                                                              -------- --------
       Total consolidated revenues........................... $142,793 $138,063
                                                              ======== ========
</TABLE>

   Media/Advertising and Commercial Services revenues were derived
predominantly from customers located in the United States during the three
months ended March 31, 2001 and 2000.

   Consumer Access revenue derived from customers located outside the United
States, and excluded from International, consisted primarily of revenue from
our cable partners and their cable customers located in

                                       7
<PAGE>

Canada, and accounted for approximately 14% and 17% of total Consumer Access
revenue during the three months ended March 31, 2001 and 2000, respectively.

   International revenue earned from services provided to our unconsolidated
international joint ventures was $5 million and $4 million for the three months
ended March 31, 2001 and 2000, respectively. International revenue earned by
our consolidated operations outside of North America was $1.8 million and $2.4
for the three months ended March 31, 2001 and 2000, respectively.

   No single customer accounted for more than 10% of total consolidated
revenues for the three months March 31, 2001 and 2000.

Revenue from Related Parties

   Revenue from related parties was $10.6 million and $12.1 million for the
three months ended March 31, 2001 and 2000, respectively. Revenue from related
parties included revenue of $5.1 million and $7 million for the three months
ended March 31, 2001 and 2000, respectively, related to services such as
advertising arrangements, support services including customer service, local
area content development, development of set-top devices and pre-commercial
deployment consulting provided to our cable partners with significant
investments in our common stock. Revenue from related parties also included
revenue of $5.5 million and $5.1 million for the three months ended March 31,
2001 and 2000, respectively, related to consulting and other services rendered
to our international and other joint ventures, including arrangements on a
cost-plus basis.

Revenue Related to Our Strategic Investments

   In conjunction with many of our investments, we have strategic arrangements
to provide services to our investees consisting of the delivery of advertising
impressions, e-commerce sponsorships and revenue share arrangements on our web
sites. Revenue under these arrangements is recognized based on the fair value
of the services provided if sufficient objective evidence of fair value exists
for the investment. This revenue was $10.9 million and $12.3 million for the
three months ended March 31, 2001 and 2000, respectively. Investments under
these arrangements are recorded at their fair values on the date of the
investment. The fair values of such investments in privately held companies are
generally determined based on the price per share paid by a third party in the
same round of financing in which we participate.

Barter Revenue

   Revenue from barter transactions involving the exchange of advertising on
the Excite Network and MatchLogic for advertising in Internet, print and
television media was $3 million and $5.3 million for the three months ended
March 31, 2001 and 2000, respectively. Revenue from these exchanges is recorded
at the lower of the fair value of the advertising delivered or the advertising
received. In accordance with Emerging Issues Task Force (EITF) Issue No. 99-17,
"Accounting for Advertising Barter Transactions", effective January 20, 2000,
the fair value of advertising delivered is based on similar advertising
transactions for which we received cash during the six months prior to the
advertising barter transactions. Advertising barter transactions generally
result in the recognition of equivalent amounts of revenue and expense.

   Revenue recognized from other barter transactions, involving primarily the
exchange of MatchLogic data-marketing services for software and property and
equipment for internal use, was $0.4 million and $3.1 million for the three
months ended March 31, 2001 and 2000, respectively. Revenue from these
exchanges is generally recorded at the fair value of the services provided
unless the fair value of the services or products received is more readily
determinable.

Write-down of Other Investments

   We recorded impairment write-downs of other investments of $13.4 million
during the three months ended March 31, 2001, including write-downs related to
publicly held investments of $6.9 million recorded against

                                       8
<PAGE>

unrealized losses included in accumulated other comprehensive income and write-
downs related to privately held investments of $6.5 million recorded directly
against other investments. The impairment write-downs related to publicly held
investments resulted from our conclusion that declines in the fair market
values of certain investments below their carrying values were not temporary
(generally, the fair market values were below the carrying values for a
continuous period of six months or more). The impairment write-downs related to
privately held investments resulted from our conclusion that the carrying
values of certain investments were not recoverable, based on indicators such as
limited liquidity and poor prospects for additional financing.

Restructuring Charge

   On January 23, 2001, we announced a workforce reduction of approximately 250
employees and a related operational restructuring which was approved by our
board of directors on January 19, 2001. The majority of reductions and
restructuring affected the Excite Network narrowband operations in the
Media/Advertising business segment and the iMALL operations in the Commercial
Services business segment. We also announced plans to exit the business
operations of iMALL and Enliven, formerly Narrative Communications, either
through an outright or partial sale or by winding down operations. We sold our
Enliven business unit during the three months ended March 31, 2001 in exchange
for a 20% ownership interest in a newly-formed entity that plans to continue
the former Enliven operations. We were not successful in selling the iMALL
operations and effective March 1, 2001, we commenced the winding down of iMALL
activities. In addition, we have decided to discontinue our DSL offering to
@Work customers at the end of the first quarter of 2001 due to the dissolution
of Northpoint, a wholesale provider of DSL connectivity. The substantial
majority of employees affected by the workforce reduction terminated pursuant
to the restructuring plan during the first quarter of 2001. We plan to complete
remaining terminations and other exit activities during the second quarter of
2001.

   We incurred a restructuring charge of $17.1 million for the three months
ended March 31, 2001 related to exiting the above activities, including $12.6
million related to exiting certain Excite Network narrowband operations, $3.8
million related to iMALL and the remainder related to Enliven and @Work DSL.
The restructuring charge included $5.5 million of severance-related amounts,
$5.6 million of losses on noncancellable leases net of expected sublease income
related to facilities exited as a result of consolidating personnel, $4.7
million related to equipment and other assets that have been made redundant or
will no longer be used as a result of the activities exited, and $1.3 million
of termination costs incurred for contracts related to exited activities. Cash
payments charged against the liability related to these restructuring charges
for the three months ended March 31, 2001 were $6 million. The remaining $11.1
million as of March 31, 2001 consisted of non-cash amounts and amounts
requiring future cash payment, including $4.5 million for equipment and other
assets to be disposed of, $5.3 million related to exited facilities, $0.5
million for terminated contracts, and $0.8 million for severance-related
amounts.

2. Business Combinations

Acquisition-Related Costs

   Acquisition-related costs were as follows for the periods indicated (in
thousands):

<TABLE>
<CAPTION>
                                                               Three Months
                                                              Ended March 31,
                                                             -----------------
                                                               2001     2000
                                                             -------- --------
   <S>                                                       <C>      <C>
   Amortization of goodwill and other acquired intangible
    assets.................................................. $ 96,698 $567,348
   Amortization of acquisition-related deferred
    compensation............................................    5,258    4,904
   Other acquisition-related costs..........................      160      881
                                                             -------- --------
     Total acquisition-related costs and expenses........... $102,116 $573,133
                                                             ======== ========
</TABLE>

Amortization of goodwill and other acquired intangible assets

   Amortization of goodwill and other acquired intangible assets was $96.7
million and $567.3 million for the three months ended December 31, 2001 and
2000, respectively. Accumulated amortization of these

                                       9
<PAGE>

intangible assets was $148.7 million and $1,670.9 million as of March 31, 2001
and 2000, respectively. The reduction in amortization and accumulated
amortization in the first quarter of 2001 as compared to the first quarter of
2000 resulted from the impairment write-downs of these intangible assets
amounting to $4,609.1 million during the year ended December 31, 2000 and an
additional $600.1 million during the three months ended March 31, 2001. Future
amortization related to goodwill and other acquired intangible assets will be
based on new carrying values as adjusted by the impairment write-downs.

Amortization of acquisition-related deferred compensation

   Amortization of deferred compensation related to acquisitions was $5.3
million and $4.9 million for the three months ended March 31, 2001 and 2000,
respectively. Acquisition-related deferred compensation resulted from certain
outstanding employee stock options and restricted stock that we assumed in the
acquisitions of Webshots and Bluemountain.com in 1999 and DataInsight in 2000.
Deferred compensation is measured as the difference between the exercise price
of an unvested award and the fair market value of our Series A common stock at
the date of the acquisition and is amortized over the vesting term of the
award.

   Amortization of deferred compensation related to the issuance of restricted
stock and stock options to employees under our own stock purchase agreements
was $0.3 million during each of the three months ended March 31, 2001 and 2000.
This amortization, which is not acquisition-related, is included in the
category of operating costs in which the related employee salaries are
recorded.

Other acquisition-related costs

   Costs directly associated with our acquisitions that were not capitalized as
part of the purchase consideration were $0.2 million and $0.9 million for the
three months ended March 31, 2001 and 2000, respectively. These costs were
incurred predominantly as a result of ongoing personnel, systems and technology
integration efforts related primarily to our acquisitions of Excite, iMALL,
Bluemountain.com, Kendara and Worldprints.

Impairment Write-down of Goodwill and Other Acquired Intangible Assets

   During the three months ended March 31, 2001, we identified additional
indicators of possible impairment of our long-lived assets (principally,
goodwill and other acquired intangible assets) on a basis similar to the
impairment indicators identified as of December 31, 2000. The impairment
indicators included continued deterioration in the business climate of, and
reduced levels of venture capital funding activity for, Internet advertising
and other Internet-based companies, continued significant declines in the
market values of our competitors in the Internet advertising industry, and
changes made and announced in April 2001 in our operating and cash flow
forecasts for the remainder of 2001.

   We performed asset impairment tests with the assistance of independent
valuation experts at the business unit level, the lowest level for which we
have identifiable cash flows. The tests were performed by comparing the
expected undiscounted cash flows for a five-year period, plus a terminal value
for future cash flows, to each business unit's carrying amount of the goodwill
and other intangible assets resulting from purchase business combinations in
which the acquired operations have continued to be managed as separate business
units. We determined that the carrying amounts of property and equipment and
other tangible assets without alternate use other than as currently used by the
business units tested for impairment were not significant. Based on the results
of these tests, we determined that the carrying values of business-unit
goodwill and other intangible assets related to Excite, Kendara, DataInsight,
Rucker, iMALL, Bluemountain.com, Webshots, and Worldprints were impaired.

   We determined, with the assistance of independent valuation experts, the
fair value of the impaired long-lived assets for the respective business units.
Fair value was determined using the discounted cash flow method and the market
comparison method. An impairment write-down of goodwill and other intangible
assets totaling

                                       10
<PAGE>

$600.1 million was recorded during the first quarter of 2001, reflecting the
amount by which the carrying amounts of the assets exceeded their respective
fair values. The write-down consisted of $569.1 million for goodwill and $31
million for other acquired intangible assets. These intangibles assets were
associated primarily with business units operating in the Media/Advertising
segment.

3. Investments in Affiliated Companies

Work.com

   Our Work.com joint venture discontinued operations on March 31, 2001 as a
result of the current decline in online advertising spending. We invested $15
million in this joint venture in April 2000 and we have fully reduced this
investment by our equity share of the joint venture's losses through March 31,
2001.

At Home Japan

   Under our joint venture agreement pertaining to At Home Japan, we may be
required to make future contributions of up to 546 million Yen, or $3.8
million, based on timing to be determined by At Home Japan's board of
directors. If we do not make required contributions, our ownership position
would be diluted. Under specified circumstances, we may sell up to 50% of our
interest in At Home Japan. Our performance-based warrants for up to 0.9 million
shares issued to our Japanese cable partners in a prior year were exercisable
as to 0.3 million warrants as of March 31, 2001. The fair values of these
warrants are recorded when earned as investments in affiliated companies.

At Home Solutions

   At Home Solutions offers production, packaging, marketing, distribution and
support of the @Home service for delivery by small and medium-sized cable
operators to residential and small office customers in the United States. We
have an option for a three-year period commencing on April 1, 2002 to purchase
the interest owned by each of the other partners in the At Home Solutions joint
venture at fair market value. If we do not exercise the purchase option, each
joint venture partner will have the right to sell its interest in At Home
Solutions to the other partners, and the partners collectively will have the
right to require At Home Solutions to register the sale of their interests to
the public or collectively to purchase our interest in At Home Solutions for a
nominal price.

4. Comprehensive Loss

   The components of our comprehensive loss for each period presented are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                              March 31,
                                                         --------------------
                                                           2001       2000
                                                         ---------  ---------
   <S>                                                   <C>        <C>
   Net loss............................................. $(832,604) $(676,521)
   Unrealized gain (loss) on available-for-sale
    investments.........................................   (16,002)    (7,840)
   Foreign currency translation gain (loss).............        98        131
                                                         ---------  ---------
   Comprehensive loss................................... $(848,508) $(684,230)
                                                         =========  =========
</TABLE>

5. Subsequent Events

Measures to Conserve Cash and Raise Additional Funds

   Our cash position has deteriorated more rapidly than we previously
anticipated since the end of the first quarter of 2001 due in large part to
accelerating weakness in the demand for online advertising and marketing
services. On April 17, 2001, we announced that we are taking several immediate
measures to conserve cash

                                       11
<PAGE>

and raise additional funds. These measures include expense reductions; a non-
binding agreement with AT&T under which AT&T would provide us with $75 million
to $85 million in connection with the replacement of the backbone fiber
agreement between the companies and an outsourcing agreement between AT&T and
us to maintain and improve current network performance levels; debt and/or
equity financing from third parties, or financing through other mechanisms; and
the potential sale or restructuring of media operations not directly supporting
our broadband strategy. There can be no assurance that we will be successful in
achieving our targeted expense reductions, completing the definitive agreements
contemplated by the Letter of Agreement with AT&T or otherwise raising
sufficient additional funds to finance our operations on a timely basis. If we
do not achieve our targeted expense reductions and raise at least $75 million
to $80 million in cash by June 30, 2001, there would be a material adverse
impact on our operations and liquidity.

   Under the Letter of Agreement with AT&T, which is subject to negotiation of
a definitive agreement and other conditions, we would outsource some of our
engineering and operations services to AT&T and replace the AT&T backbone
capacity agreement with an agreement under which we would receive $75 million
to $85 million in cash from AT&T. Assuming physical integration of our network
assets with those of AT&T, AT&T would be required to provide these services at
a price equal to 10% less than our baseline costs to provide these services
ourselves. Under the definitive agreement, we would develop a transition plan
providing for the transfer of a portion of our employees to AT&T in order for
AT&T to provide these services. In conjunction with replacing the backbone
agreement, we would make monthly payments to AT&T over 20 years equaling
approximately $0.6 million per month, assuming we receive $75 million in cash
at the time the backbone agreement is replaced. Under the definitive agreement,
we would agree to sell to AT&T at book value the assets necessary to provide
the outsourced services and the network transport services covered by the
backbone agreement, which include network, test lab and infrastructure assets,
and to provide AT&T with access to other assets and assignments of licenses to
enable AT&T to provide these services.

Termination of Relationship with Cablevision

   On April 23, 2001, we announced that we are formally seeking the termination
of our relationship with Cablevision and the return of warrants to purchase up
to 21.9 million shares of our Series A common stock issued to Cablevision. As a
result, as of March 31, 2001 we are no longer reporting Cablevision subscribers
in our subscriber numbers and we have restated prior year subscriber numbers to
conform to this presentation.

Workforce Reduction

   On April 30, 2001, we announced a workforce reduction of approximately 380
employees, or 13% of our workforce. The workforce reduction impacted all
divisions throughout the company, but was more heavily weighted towards our
media operations. As a result, we expect to record severance and related costs
of more than $5 million during the second quarter of 2001.


                                       12
<PAGE>

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

   The following discussion of our financial condition and results of
operations should be read in conjunction with the condensed consolidated
financial statements and related notes contained in this report and the
information contained in our annual report for the year ended December 31,
2000. This discussion contains statements about events or circumstances that
have not yet occurred, such as statements regarding our plans, objectives,
expectations and intentions, which are "forward-looking" statements within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934.
In some cases, you can identify these statements by words such as "may,"
"might," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue," and other similar terms.
These forward-looking statements may include, among other things, projections
of our future financial performance, our anticipated growth and anticipated
trends in our businesses. These statements are only predictions, based on our
current expectations about future events and we cannot guarantee that they will
be accurate. These forward-looking statements involve risks and uncertainties,
and our actual results, performance or achievements could differ materially
from those expressed or implied by the forward-looking statements on the basis
of several factors, including those that we discuss under the section entitled
"Risk Factors" beginning on page 24. We encourage you to read that section
carefully. These forward-looking statements speak only as of the date of this
report, and we will not necessarily update information in this report if any
forward-looking statement later turns out to be inaccurate.

Overview

   We are a leading global provider of broadband network and media services.
These services include the @Home service, the @Work service, media and
advertising services provided by Excite and MatchLogic, and international
services. The @Home service is a residential high-speed Internet service
delivered, with the assistance of our cable partners, to approximately 3.2
million subscribers worldwide, including approximately 2.9 million subscribers
in North America. We have arrangements with our cable partners, which include
AT&T, Comcast, Cox, Shaw, Rogers and many others, to provide the @Home service
to 64 million homes worldwide, of which approximately 38 million homes were
upgraded for two-way data traffic and therefore capable of receiving the @Home
service as of March 31, 2001. Our @Work service provides approximately 11,800
small and medium-sized enterprises with telecommunication lines such as cable
and T1 and several content delivery networks with very high-speed data lines
such as OC-3. Excite provides advertising and media services on the Excite
Network, including narrowband and broadband content offerings such as the
Excite portal, the @Home 2000 services offering our personalized Excite content
to our broadband subscribers, the Bluemountain.com electronic greeting card
service and the Webshots web site offering online digital photos. MatchLogic
provides targeted advertising and data marketing services. International
services include international versions of the Excite portal and the @Home
high-speed Internet service.

   Currently, our services are organized into four business segments. Consumer
Access includes the @Home service, Commercial Services includes the @Work
service, Media/Advertising includes Excite and MatchLogic advertising and media
services, and International includes our international operations.

Recent Events

Termination of Relationship with Cablevision

   On April 23, 2001, we announced that we are formally seeking the termination
of our relationship with Cablevision and the return of warrants to purchase up
to 21.9 million shares of our Series A common stock issued to Cablevision. As a
result, as of March 31, 2001 we are no longer reporting Cablevision subscribers
in our subscriber numbers and we have restated prior year subscriber numbers to
conform to this presentation.

                                       13
<PAGE>

Measures to Conserve Cash and Raise Additional Funds

   Our cash position has deteriorated more rapidly than we previously
anticipated since the end of the first quarter of 2001 due in large part to
accelerating weakness in the demand for online advertising and marketing
services. On April 17, 2001, we announced that we are taking several immediate
measures to conserve cash and raise additional funds. These measures include
expense reductions; a non-binding agreement with AT&T under which AT&T would
provide us with $75 million to $85 million in connection with the replacement
of our backbone fiber agreement with AT&T and an outsourcing arrangement
between AT&T and us to maintain and improve current network performance levels;
debt and/or equity financing from third parties, or financing through other
mechanisms; and the potential sale or restructuring of media operations not
directly supporting our broadband strategy. There can be no assurance that we
will be successful in achieving our targeted expense reductions, completing the
definitive agreements contemplated by the Letter of Agreement with AT&T or
otherwise raising sufficient additional funds to finance our operations on a
timely basis. If we do not achieve our targeted expense reductions and raise at
least $75 million to $80 million in cash by June 30, 2001, there would be a
material adverse impact on our operations and liquidity.

   Under the Letter of Agreement with AT&T, which is subject to negotiation of
a definitive agreement and other conditions, we would outsource some of our
engineering and operations services to AT&T and replace the AT&T backbone
capacity agreement with an agreement under which we would receive $75 million
to $85 million in cash from AT&T. Assuming physical integration of our network
assets with those of AT&T, AT&T would be required to provide these services at
a price equal to 10% less than our baseline costs to provide these services
ourselves. Under the definitive agreement, we would develop a transition plan
providing for the transfer of a portion of our employees to AT&T in order for
AT&T to provide these services. In conjunction with replacing the backbone
agreement, we would make monthly payments to AT&T over 20 years equaling
approximately $0.6 million per month, assuming we receive $75 million in cash
at the time the backbone agreement is replaced. Under the definitive agreement,
we would agree to sell to AT&T at book value the assets necessary to provide
the outsourced services and the network transport services covered by the
backbone agreement, which include network, test lab and infrastructure assets,
and to provide AT&T with access to other assets and assignments of licenses to
enable AT&T to provide these services.

Impairment Write-Down of Goodwill, Other Intangible Assets and Other Assets

   Due to a continuing deterioration in the market values and business climate
of Internet companies during the first quarter of 2001 and the changes made and
announced in April 2001 in our operating and cash flow forecasts for the
remainder of 2001, we concluded that goodwill and intangible assets recorded in
connection with acquisitions of some Internet-related companies might not be
recoverable. An impairment assessment, test and measurement resulted in the
recording of a write-down of goodwill and intangible assets of $600.1 million
primarily related to our acquisitions that operate in our Media/Advertising
business segment and to a lesser extent the iMALL acquisition operating in the
Commercial Services business segment.

   We also recorded a write-down of $13.4 million for the first quarter of 2001
related to our other investments, including publicly held and privately held
equity securities. This write-down resulted primarily from declines, which we
deemed were not temporary, in the fair market values of publicly held
investments below their carrying values. In addition, the carrying values of
some of our privately held investments that we determined to be unrecoverable
were written down to estimated net realizable value.

Closure of Work.com

   Our Work.com joint venture discontinued operations on March 31, 2001 as a
result of the current decline in online advertising spending. We invested $15
million in this joint venture in April 2000 and we have fully reduced this
investment by our equity share of the joint venture's losses through March 31,
2001.

                                       14
<PAGE>

Workforce Reductions

   On January 23, 2001, we announced a workforce reduction of approximately 250
employees. The majority of reductions affected the Excite Network in the
Media/Advertising business segment and iMALL in the Commercial Services
business segment. As a result, we recorded restructuring charges of $5.5
million during the first quarter of 2001.

   On April 30, 2001, we announced another workforce reduction of approximately
380 employees, or 13% of our workforce. The workforce reduction impacted all
divisions throughout the company, but was more heavily weighted towards our
media operations. As a result, we expect to record severance and related costs
of more than $5 million during the second quarter of 2001.

Exiting of Certain Operations

   On February 23, 2001, we announced that we sold our Enliven business unit in
exchange for a 20% ownership in a newly-formed entity that plans to continue
the former Enliven operations. Enliven was not significant to our financial
position or results of operations.

   We were not successful in selling the iMALL operations during the first
quarter of 2001 and therefore we commenced winding down iMALL's operations
effective March 1, 2001. Although iMALL did not generate significant recurring
revenues since its acquisition, we may experience a reduction in future
Commercial Services revenues in 2001 as compared to 2000 as a result of exiting
the iMALL operations.

   We decided to discontinue our DSL offering to @Work customers at the end of
the first quarter of 2001 due to the dissolution of Northpoint, a wholesale
provider of DSL connectivity. Revenue from DSL connections sold to @Work
customers was not significant to our financial position or results of
operations.

   We incurred restructuring charges of $17.1 million during the first quarter
of 2001 related to exiting these businesses and the workforce reductions
discussed above.

Results of Operations

Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

Revenues

   Our reportable segments have changed from prior years, and the 2000
information has been restated accordingly. The following represents our
revenues by business segment for the periods indicated (dollars in thousands):

<TABLE>
<CAPTION>
                                                        Three Months Ended March
                                                                  31,
                                                        -------------------------
                                                          2001   Change    2000
                                                        -------- ------  --------
   <S>                                                  <C>      <C>     <C>
   Revenues:
     Consumer access................................... $ 75,360   80%   $ 41,977
     Commercial services...............................   15,546   15%     13,467
     Media/advertising.................................   45,057  (41%)    76,223
     International.....................................    6,830    7%      6,396
                                                        --------  ---    --------
       Total revenues.................................. $142,793    3%   $138,063
                                                        ========  ===    ========
</TABLE>

   Consumer Access

   Consumer Access revenues include the percentage of @Home service
subscription fees from North American subscribers that we received under our
revenue sharing agreements with our cable partners, including

                                       15
<PAGE>

fees for premium services such as multiple IP addresses, and fees received from
our cable partners related to customer support operations and advanced set-top
development. The following are significant factors affecting revenue from the
@Home service, which represents the substantial portion of Consumer Access
revenues:

  . Revenue from the @Home service varies by cable partner and market in the
    United States, but typically represents 35% of the average $40 per month
    fee collected from each subscriber by the cable partner. AT&T has
    recently announced its intention to increase the price it charges for the
    @Home service to $46 per month beginning in June 2001.

  . Our Canadian cable partners perform a significant portion of the customer
    and infrastructure support of the @Home service, and as a result, our
    percentage of Canadian subscriber fees is approximately 20%. Canadian
    cable partners also typically charge approximately $30 per month for the
    @Home service. Our revenue from Canadian @Home subscribers has
    historically accounted for approximately 15% to 20% of Consumer Access
    revenues.

  . Subscribers that choose to purchase their own modems may pay a reduced
    monthly fee. We have recently released self-installation kits in markets
    served by Comcast and Cox and this will likely result in a greater number
    of new subscribers purchasing their own modems.

  . Our cable partners may offer incentives to new subscribers including
    reduced price or free service for several months, and are generally free
    to decide the price that they charge for the @Home service.

  . Revenue from @Home subscribers outside of North America is recorded by
    our unconsolidated joint ventures and not in our Consumer Access segment.

  . We receive a smaller share of revenue from @Home subscribers in North
    America served by our @Home Solutions joint venture.

   Due to the above factors, revenue from the @Home service may significantly
lag subscriber growth rates and may not result in consistent measurements such
as average revenue per unit (ARPU) over any period. In addition, the number of
@Home subscribers at the end of a particular period is not representative of
the average number of paying subscribers during that period.

   Consumer Access revenues increased by 80% to $75.4 million, or 53% of total
revenues, for the first quarter of 2001, from $42 million, or 30% of total
revenues, for the first quarter of 2000. The increase in Consumer Access
revenues was primarily attributable to the growth in the number of subscribers
to the @Home service. We had 2,867,000 North American @Home subscribers as of
March 31, 2001, compared to 1,355,000 subscribers as of March 31, 2000, which
represents an increase of 1,512,000 subscribers, or 112%, over the prior
period. Please note that as of March 31, 2001 we are no longer reporting
Cablevision subscribers in our subscriber totals and we have restated the March
31, 2000 North American subscriber numbers to exclude 71,000 Cablevision
subscribers in conformity with this revised presentation. Consumer Access
revenues did not increase at the same rate between the first quarter of 2001
and 2000 as did the percentage growth in @Home subscribers due to a combination
of the above factors, the most significant of which was free service incentives
offered by our cable partners to promote the @Home service to new subscribers.

   Revenue from the @Home service in future periods will continue to be
affected by the above factors. In the near term specifically, revenue from the
@Home service may increase due to higher rates charged by our cable partners
such as AT&T. However, an increase in the number of subscribers purchasing
cable modems instead of renting them may partially offset this expected
increase in revenue. In addition, our subscriber growth rates are dependent on
the number of markets and households that our cable partners upgrade to receive
the @Home service and the subscriber penetration rates in those markets. As of
March 31, 2001, the markets of our cable partners in North America included 54
million households (excluding 5 million Cablevision households that were
included in previously reported totals), of which 61%, or 33 million (excluding
1 million Cablevision households included in previously reported totals), were
capable of receiving the @Home service. In general, we expect the percentage
growth rate in subscribers to decrease as the number of subscribers

                                       16
<PAGE>

increases and as penetration rates in existing markets increase. However, we
believe that our subscriber growth will benefit as the @Home service becomes
more widely available and as self-installation kits become more widely
deployed. Please see "Risk Factors--Risks Related to Our Broadband Business"
for further discussion of factors that may affect our ability to generate
Consumer Access revenues in the future.

   Commercial Services

   Commercial Services revenues include revenue from our @Work service
including small business hosting services and content delivery network
agreements. Revenue from the @Work service and content delivery networks is
based on the number of customers and the type of data connections used by those
customers.

   Commercial Services revenues increased by 15% to $15.5 million, or 11% of
total revenues, for the first quarter of 2001 from $13.5 million, or 10% of
total revenues, for the first quarter of 2000. This increase was primarily
attributable to the growth of customers to the @Work service. We had 11,800
@Work customers as of March 31, 2001, compared to 6,200 customers as of March
31, 2000, which represents an increase of 5,600 customers, or 90%, over the
prior period. @Work revenue did not increase at the same rate between the first
quarter of 2001 and 2000 as did the percentage growth in @Work customers due
primarily to new DSL customers that generate lower revenues per customer than
T1 and higher bandwidth customers.

   In the past, we have sourced DSL connectivity for the @Work service through
Northpoint but due to its dissolution during the first quarter of 2001, we
decided to stop offering DSL services. In addition, we discontinued certain
iMALL e-commerce business application services during the first quarter of
2001. As a result of exiting iMALL operations, our Commercial Services revenues
maybe lower for the remainder of 2001 as compared to 2000. However, we expect
that ongoing Commercial Services revenues excluding those from exited iMALL
activities will increase during 2001 as compared to prior year periods. We
expect that an increasing portion of our Commercial Services revenues in the
future will be accounted for by content delivery networks and other parties
that require access to high bandwidth over an intelligent private network.
However, growth in revenues from content delivery networks is dependent on
continued demand for their content services, which could be impacted by the
downturn in the U.S. economy and weakening demand for content and advertising
services in the Internet sector. Please see "Risk Factors--Risks Related to Our
Broadband Business" for further discussion of factors that may affect our
ability to generate Commercial Services revenues in the future.

   Media/Advertising

   On April 17, 2001, we announced that we are assessing the potential sale or
restructuring of media operations not directly supporting our broadband
strategy. If any of these actions is taken, our Media/Advertising revenues in
future periods may decrease substantially.

   Media/Advertising includes revenues generated by our narrowband and
broadband Excite portals and the Bluemountain.com and Webshots web sites
(together, the Excite Network), as well as targeted advertising, online
database marketing and e-commerce relationship management services provided by
MatchLogic.

   Media/Advertising revenues decreased by 41% to $45.1 million, or 32% of
total revenues, for the first quarter of 2001 from $76.2 million, or 55% of
total revenues, for the first quarter of 2000. In general, the volume of
traffic on our web sites has remained relatively stable during the first
quarter of 2001 and 2000, while our advertising rates and number of advertisers
have declined in response to softness in the Internet advertising market and
the deterioration in the Internet business climate.

   We anticipate that difficult conditions related to Internet advertising will
persist for the remainder of 2001 and we expect continued lower future levels
of Media/Advertising revenues as compared to 2000. We believe that attracting
more traditional companies to advertise on the Internet, particularly using a
broadband medium,

                                       17
<PAGE>

will be an important factor driving Media/Advertising revenues in the future.
Please see "Risk Factors--Risk Related to Our Media Business" for further
discussion of factors that may affect our ability to generate revenues from
Media/Advertising in the future.

   International

   International includes revenue earned from services provided to our joint
ventures outside of North America, including revenue sharing and consulting and
other services provided under arrangements under a cost plus basis, and revenue
earned by our consolidated operations outside of North America, consisting
primarily of advertising revenue.

   Revenues from International increased by 7% to $6.8 million, or 5% of total
revenues, for the first quarter of 2001 from $6.4 million, or 5% of total
revenues, for the first quarter of 2000. International revenue earned from our
unconsolidated international joint ventures was $5 million and $4 million for
the first quarter of 2001 and 2000, respectively. International revenue earned
by our consolidated operations outside of North America was $1.8 million and
$2.4 million for the first quarter of 2001 and 2000, respectively. The increase
in International revenue was due primarily to the growth in international @Home
broadband operations.

   In future periods, we expect International revenues to be affected by
similar factors to those impacting Media/Advertising and Consumer Access
revenues, and also by the level of consulting and other services we provide to
our joint ventures, the timing and amount of which may vary significantly.
Please see "Risk Factors--International growth is important to our business,
but our international operations are subject to additional risks and may not be
successful" and "Risk Factors-- Risk Related to Our Media Business" for further
discussion of factors that may affect our ability to generate revenues from
International in the future.

   Revenue from related parties

   Revenue from related parties decreased by 12% to $10.6 million, or 7% of
total revenues, for the first quarter of 2001 from $12.1 million, or 9% of
total revenues, for the first quarter of 2000. Revenue from related parties
included revenue of $5.1 million and $7 million for the first quarter of 2001
and 2000, respectively, related to services such as advertising arrangements,
support services including customer service, local area content development,
development of set-top devices and pre-commercial deployment consulting
provided to our cable partners with significant investments in our common
stock. Revenue from related parties also included revenue of $5.5 million and
$5.1 million for the first quarter of 2001 and 2000, respectively, related to
consulting and other services rendered to our international and other joint
ventures, including arrangements on a cost-plus basis.

   Revenue related to our strategic investments

   In conjunction with many of our investments, we have strategic arrangements
to provide services to our investees consisting of the delivery of advertising
impressions, e-commerce sponsorships and revenue share arrangements on our web
sites. Revenue under these arrangements is recognized based on the fair value
of the services provided if sufficient objective evidence of fair value exists
for the investment. This revenue decreased by 11% to $10.9 million, or 8% of
total revenues, for the first quarter of 2001, from $12.3 million, or 9% of
total revenues, for the first quarter of 2000. Investments under these
arrangements are recorded at their fair values on the date of the investment.
The fair values of such investments in privately held companies are generally
determined based on the price per share paid by a third party in the same round
of financing in which we participate.

   Barter revenue

   Revenue from barter transactions involving the exchange of advertising on
the Excite Network and MatchLogic for advertising in Internet, print and
television media decreased by 43% to $3 million, or 2% of

                                       18
<PAGE>

total revenues, for the first quarter of 2001 from $5.3 million, or 4% of total
revenues, for the first quarter of 2000. Revenue from these exchanges is
recorded at the lower of the fair value of the advertising delivered or the
advertising received. In accordance with Emerging Issues Task Force (EITF)
Issue No. 99-17, "Accounting for Advertising Barter Transactions", effective
January 20, 2000, the fair value of advertising delivered is based on similar
advertising transactions for which we received cash during the six months prior
to the advertising barter transactions. Advertising barter transactions
generally result in the recognition of equivalent amounts of revenue and
expense.

   Revenue recognized from other barter transactions, involving primarily the
exchange of MatchLogic data-marketing services for software and property and
equipment for internal use, decreased by 87% to $0.4 million, or less than 1%
of total revenues, for the first quarter of 2001 from $3.1 million, or 2% of
total revenues, for the first quarter of 2000. Revenue from these exchanges is
generally recorded at the fair value of the services provided unless the fair
value of the services or products received is more readily determinable.

Operating costs

   Our operating costs were as follows for the periods indicated (dollars in
thousands):

<TABLE>
<CAPTION>
                                                       Three Months Ended March
                                                                 31,
                                                       -------------------------
                                                         2001   Change    2000
                                                       -------- ------  --------
   <S>                                                 <C>      <C>     <C>
   Operating costs:
     Cost of services and products.................... $ 92,634   62%   $ 57,239
     Product development and engineering..............   29,405   40%     20,975
     Sales and marketing..............................   61,705    8%     56,926
     General and administrative.......................   17,402   62%     10,724
     Restructuring charge                                17,063  n/a         --
     Costs and amortization of distribution
      agreements......................................   24,653  (74%)    93,965
     Costs and amortization of goodwill, intangible
      assets, deferred compensation and other
      acquisition-related amounts.....................  102,116  (82%)   573,133
     Write-down of goodwill, other intangible assets
      and other assets................................  600,073  n/a         --
                                                       --------  ---    --------
       Total operating costs.......................... $945,051   16%   $812,962
                                                       ========  ===    ========
</TABLE>

   Cost of services and products

   Cost of services and products is primarily related to our broadband network
for delivering the @Home and @Work services and our Internet web sites, and
includes costs related to telecommunications and connectivity, web hosting,
technical and customer support, operational personnel, equipment depreciation,
and royalties, license arrangements and revenue sharing arrangements for
content and other services. Cost of services and products in Media/Advertising
is typically lower than in Consumer Access and Commercial Services because
delivering broadband services is more capital intensive and requires higher
amounts of connectivity charges, network maintenance and technical support. The
level of cost of services and products for Consumer Access and Commercial
Services is dependent on the number of @Home subscribers and @Work customers as
well as expenditures required in providing a stable and reliable broadband
network. The level of cost of services and products for Media/Advertising is
primarily dependent on the number of arrangements involving royalties,
licensing and revenue share arrangements for content since costs related to
servers and hosting and other costs such as customer support are largely fixed.
Cost of services and products for International are primarily dependent on
factors similar to those of our Media/Advertising segment.

   Cost of services and products increased by 62% to $92.6 million, or 65% of
total revenues, for the first quarter of 2001 from $57.2 million, or 41% of
total revenues, for the first quarter of 2000. The increase was primarily
driven by the Consumer Access and Commercial Services segments as a result of
network

                                       19
<PAGE>

maintenance, depreciation of network equipment, connectivity costs and customer
service operations related to the increase in our @Home and @Work customers and
our efforts to stabilize, scale and improve the reliability of our broadband
network.

   We expect cost of services and products to increase in the future primarily
due to costs associated with supporting our growing @Home and @Work customer
base, and as we continue to make investments in an effort to stabilize, scale
and improve the reliability of our broadband network.

   Gross Margin. We define gross margin as total revenues minus cost of
services and products, excluding cost and amortization of distribution
agreements, which is a presentation not in conformity with generally accepted
accounting principles. Gross margin decreased by 38% to $50.2 million, or 35%
of total revenues, for the first quarter of 2001, from $80.8 million, or 59% of
total revenues, for the first quarter of 2000. The decrease in gross margin and
gross margin as a percentage of total revenues was due to increasing cost of
services and products in Consumer Access and Commercial Services during the
first quarter of 2001 resulting primarily from our efforts to stabilize, scale
and improve the reliability of our broadband network.

   We expect to continue focusing on the scale, stability and reliability of
our network and this may result in a decrease in our gross margin as a
percentage of total revenues during some future time periods, based on the
timing and level of expenditures related to these efforts. We anticipate that
the marginal cost of services and products related to each new @Home or @Work
customer will decrease in future periods, resulting in higher gross margin as a
percentage of revenue in the long term. However, our operating results may
fluctuate significantly, and our revenues may grow at a slower rate than cost
of services and products. See "Risk Factors--Our Operating Results May
Fluctuate."

   Product development and engineering

   Product development and engineering costs consist primarily of salaries and
related costs for hardware and software development and engineering personnel,
consulting fees, equipment depreciation, supplies, and allocated overhead costs
such as computer systems and facilities. Product development and engineering
costs are incurred primarily in Commercial Services and Consumer Access related
to broadband network initiatives and in Media/Advertising related to the
introduction of new services and functionality on our narrowband and broadband
web sites. Product development and engineering costs related to internally
developed software for internal use and for our web sites, such as labor and
contractor costs for programming, are capitalized when it is probable that the
project will be completed and the related assets will be used as intended.

   Product development and engineering costs increased by 40% to $29.4 million,
or 21% of total revenues, for the first quarter of 2001, from $21 million, or
15% of total revenues, for the first quarter of 2000. Approximately two thirds
of the increase was due to higher costs in Commercial Services and Consumer
Access related to activities associated with enhancing the stability,
scalability and reliability of our broadband network as well as for advanced
broadband services, such as premium subscription-based services, billing and
back-office systems, and auto-provisioning and self-installation initiatives.
The other third of the increase was due to higher costs related to iMALL e-
commerce business applications, which we were in the process of exiting in the
first quarter of 2001.

   We anticipate that product development and engineering costs will continue
to increase on an absolute dollar basis in the future due in part to continuing
design and development costs related primarily to Commercial Services and
Consumer Access in areas such as network stability, scalability and reliability
and advanced broadband services.

   Sales and marketing

   Sales and marketing costs consist primarily of promotional and advertising
costs, personnel costs, commissions, agency and consulting fees, and allocated
overhead costs such as computer systems and facilities.

                                       20
<PAGE>

For Media/Advertising, we have a direct sales force that sells banner
advertisements and sponsorships on the Excite Network to advertisers and
advertising agencies. For Consumer Access, we currently rely on our cable
partners to market the @Home service in local markets although we have
historically made additional marketing funds available to our cable partners
for this purpose. In addition, we have engaged in nationwide marketing of the
@Home service through promotional activities and retail initiatives. Sales and
marketing costs in Commercial Services are primarily related to promotion of
the @Work service.

   Sales and marketing costs increased by 8% to $61.7 million, or 43% of total
revenues, for the first quarter of 2001 from $56.9 million, or 41% of total
revenues, for the first quarter of 2000. This increase was primarily due to
increased strategic alliances related to our broadband services and
MatchLogic's data acquisition costs, offset by a decrease in promotions costs
associated with our narrowband service and our free ISP product, which we
discontinued during the first quarter of 2001.

   We expect sales and marketing costs to decline moderately on an absolute
dollar basis during the remainder of 2001 primarily due to lower levels of
spending to promote the Excite Network and cost savings realized from our
workforce reductions.

   General and administrative

   General and administrative costs consist primarily of administrative, legal
and executive personnel costs, fees for professional services and the related
costs of facilities and computer systems to support our operations. General and
administrative costs increased by 62% to $17.4 million, or 12% of total
revenues, for the first quarter of 2001 from $10.7 million, or 8% of total
revenues, for the first quarter of 2000. The increase was due primarily to
growth in the number of administrative personnel, expansion of facilities and
computer systems, and an increase in professional services to support the
growth of our operations and infrastructure between the first quarter of 2001
and 2000.

   We anticipate that general and administrative costs may increase at a slower
rate in the future as we adjust our administrative functions to support our
current business strategies.

   Restructuring charge

   On January 23, 2001, we announced a workforce reduction of approximately 250
employees and a related operational restructuring which was approved by our
board of directors on January 19, 2001. The majority of reductions and
restructuring affected the Excite Network narrowband operations in the
Media/Advertising business segment and the iMALL operations in the Commercial
Services business segment. We also announced plans to exit the business
operations of iMALL and Enliven, formerly Narrative Communications, either
through an outright or partial sale or by winding down operations. We sold our
Enliven business unit during the three months ended March 31, 2001 in exchange
for a 20% ownership interest in a newly-formed entity that plans to continue
the former Enliven operations. We were not successful in selling the iMALL
operations and effective March 1, 2001, we commenced the winding down of iMALL
activities. In addition, we decided to discontinue our DSL offering to @Work
customers at the end of the first quarter of 2001 due to the dissolution of
Northpoint, a wholesale provider of DSL connectivity. The substantial majority
of employees affected by the workforce reduction terminated pursuant to the
restructuring plan during the first quarter of 2001. We plan to complete
remaining terminations and other exit activities during the second quarter of
2001.

   We incurred a restructuring charge of $17.1 million for the three months
ended March 31, 2001 related to exiting the above activities, including $12.6
million related to exiting certain Excite Network narrowband operations, $3.8
million related to iMALL and the remainder related to Enliven and @Work DSL.
The restructuring charge included $5.5 million of severance-related amounts,
$5.6 million of losses on noncancellable leases net of expected sublease income
related to facilities exited as a result of consolidating personnel, $4.7
million related to equipment and other assets that have been made redundant or
will no longer be used as a result of the activities exited, and $1.3 million
of termination costs incurred for contracts related to

                                       21
<PAGE>

exited activities. Cash payments charged against the liability related to
these restructuring charges for the three months ended March 31, 2001 were $6
million. The remaining $11.1 million as of March 31, 2001 consisted of non-
cash amounts and amounts requiring future cash payment, including a $4.5
million write-down for equipment and other assets to be disposed of, $5.3
million related to exited facilities, $0.5 million for terminated contracts,
and $0.8 million for severance-related amounts.

   We expect to incur a restructuring charge of more than $5 million during
the second quarter of 2001 relating to the workforce reduction that we
announced on April 30, 2001.

   Cost and amortization of distribution agreements

   There was no cost associated with distribution agreements for the first
quarter of 2001, as compared to a cost of $70.7 million for the first quarter
of 2000. The cost in 2000 consisted of charges to operations based on the fair
value of warrants that were earned by our cable partners. These warrants,
which were fully earned prior to the first quarter of 2001, were issued
subsequent to entering into distribution agreements with cable partners as
performance incentives to increase the number of subscribers to the @Home
service. Therefore, such warrants are immediately charged to operations when
earned instead of being capitalized and amortized over a period of
exclusivity.

   Amortization of distribution agreements increased by 6% to $24.7 million
for the first quarter of 2001 from $23.2 million for the first quarter of
2000. These amounts result from the capitalization of the fair value of
warrants earned by cable partners and their amortization over the terms of the
respective exclusive distribution agreements in connection with which the
warrants were issued. The increase in amortization in the first quarter of
2001 over 2000 is the result of the cumulative capitalization of the fair
values of warrants earned.

   The combined cost and amortization of distribution agreements decreased by
74% to $24.7 million for the first quarter of 2001 from $94 million for the
first quarter of 2000, due primarily to the cost of distribution agreements in
2000 as discussed above.

   We will incur significant amortization of distribution agreements in future
periods, including that related to our new distribution agreements with AT&T,
Comcast and Cox. Under these new agreements executed in March 2000, we issued
warrants for an aggregate of 100.5 million shares of common stock. We expect
to record significant amounts of distribution agreements related to these
AT&T, Comcast and Cox warrants and we will amortize these amounts to
operations over the respective terms of the distribution agreements, which
become effective in June 2002 and expire in June 2006 for Comcast and Cox and
June 2008 for AT&T.

   Costs and amortization of goodwill, intangible assets, deferred
   compensation and other acquisition-related amounts

   Acquisition-related costs were as follows for the periods indicated (in
thousands):

<TABLE>
<CAPTION>
                                                     Three Months Ended March
                                                               31,
                                                     -------------------------
                                                       2001   Change    2000
                                                     -------- ------  --------
   <S>                                               <C>      <C>     <C>
   Amortization of goodwill and other acquired
    intangible assets............................... $ 96,698  (83%)  $567,348
   Amortization of acquisition-related deferred
    compensation....................................    5,258    7%      4,904
   Other acquisition-related costs..................      160  (82%)       881
                                                     --------  ---    --------
     Total acquisition-related costs and expenses... $102,116  (82%)  $573,133
                                                     ========  ===    ========
</TABLE>

   Amortization of goodwill and other acquired intangible assets. Amortization
of goodwill and other acquired intangible assets decreased by 83% from $96.7
million for the first quarter of 2001 from $567.3 million for the first
quarter of 2000. Accumulated amortization of these intangible assets was

                                      22
<PAGE>

$254.9 million and $1,670.9 million as of March 31, 2001 and 2000,
respectively. The reduction in amortization and accumulated amortization in the
first quarter of 2001 as compared to the first quarter of 2000 resulted from
the impairment write-downs of these intangible assets amounting to $4,609.1
million during the year ended December 31, 2000 and an additional $600.1
million during the first quarter of 2001. Future amortization related to
goodwill and other acquired intangible assets will be based on new carrying
values as adjusted by the impairment write-downs.

   Amortization of acquisition-related deferred compensation. Amortization of
deferred compensation related to acquisitions increased by 7% to $5.3 million
for the first quarter of 2001 from $4.9 million for the first quarter of 2000.
The increase was due to the full impact in the first quarter of 2001 of
additional deferred compensation recorded related to Bluemountain.com and
DataInsight during 2000.

   Other acquisition-related costs. Costs directly associated with our
acquisitions that were not capitalized as part of the purchase consideration
decreased by 82% from $0.2 million for the first quarter of 2001 from $0.9
million for the first quarter of 2000. These costs were incurred primarily as a
result of ongoing personnel, systems and technology integration efforts related
primarily to our acquisitions of Excite, iMALL, Bluemountain.com, Kendara and
Worldprints.

   Impairment write-down of goodwill, other intangible assets and other assets

   During the first quarter of 2001, we identified additional indicators of
possible impairment of our long-lived assets, principally goodwill and other
acquired intangible assets, on a basis similar to the impairment indicators
identified as of December 31, 2000. These impairment indicators included
continued deterioration in the business climate of, and reduced levels of
venture capital funding activity for, Internet advertising and other Internet-
related companies, continued significant declines in the market values of our
competitors in the Internet advertising industry, and changes made and
announced in April 2001 in our operating and cash flow forecasts for the
remainder of 2001.

   We performed asset impairment tests with the assistance of independent
valuation experts at the business unit level, the lowest level for which we
have identifiable cash flows. The tests were performed by comparing the
expected undiscounted cash flows for a five-year period, plus a terminal value
for future cash flows, to each business unit's carrying amount of the goodwill
and other intangible assets resulting from purchase business combinations in
which the acquired operations have continued to be managed as separate business
units. We determined that the carrying amounts of property and equipment and
other tangible assets without alternate use other than as currently used by the
business units tested for impairment were not significant. Based on the results
of these tests, we determined that the carrying values of business-unit
goodwill and other intangible assets related to Excite, Kendara, DataInsight,
Rucker, iMALL, Bluemountain.com, Webshots and Worldprints were impaired.

   We measured the impairment loss related to business units with impaired
long-lived assets based on the amount by which the carrying amounts of the
goodwill and other intangible assets within each business unit exceeded their
respective fair values. Measurement of fair value was based on an analysis by
us, with assistance from independent valuation experts, of the best information
available in the circumstances using reasonable and supportable assumptions and
projections, and included the discounted cash flow and market comparison
valuation methodologies. The discounted cash flow analysis considered the
likelihood of possible outcomes and was based on our best estimate of projected
future cash flows, including terminal value cash flows expected to result from
the disposition of the asset at the end of its useful life, discounted at our
weighted average cost of capital. Weighted average cost of capital was based on
historical risk premiums required by investors for companies of our size,
industry and capital structure and included risk factors specific to us. The
market comparison method represented our estimate of the prices that a buyer
would be willing to pay currently for similar assets, based on comparable
products and services, customer base, risks, earnings capabilities and other
factors.

                                       23
<PAGE>

   We recorded an impairment write-down totaling $600.1 million during the
first quarter of 2001. The impairment write-down within each business unit was
allocated first to goodwill, and if goodwill was reduced to zero, to
identifiable intangible assets in proportion to carrying values. This resulted
in the allocation of the impairment write-down to each acquisition as follows:
$531.1 million related to Excite goodwill; $20 million related to iMALL
acquired intangible assets; $9.6 million and $5.9 million related to
Bluemountain.com goodwill and other intangible assets, respectively; $5.5
million and $5.1 million related to Webshots goodwill and other intangible
assets, respectively; $6.8 million related to Worldprints goodwill; $6.6
million related to DataInsight goodwill; $6.4 million related to Kendara
goodwill; and $3.1 million related to Rucker goodwill. With the exception of
iMALL, which was part of Commercial Services, each entity affected by these
impairment write-downs was part of our Media/Advertising segment. For each
impaired acquired intangible asset, we recorded a new basis for financial
reporting purposes as of March 31, 2001 based on the carrying amount as
adjusted for impairment write-downs.

Interest and other income (expense), net

   Our net interest and other income consisted of the following for the periods
indicated (dollars in thousands):

<TABLE>
<CAPTION>
                                                    Three Months Ended March
                                                              31,
                                                    --------------------------
                                                      2001    Change    2000
                                                    --------  ------  --------
   <S>                                              <C>       <C>     <C>
   Interest and other income....................... $  9,894   (30%)  $ 14,224
   Interest and other expense......................  (13,190)   20%    (11,031)
                                                    --------   ---    --------
     Interest and other income (expense), net.      $ (3,296)  n/a    $  3,193
                                                    ========   ===    ========
</TABLE>

   Net interest and other income (expense) decreased by $6.5 million to net
interest and other expense of $3.3 million for the first quarter of 2001 from
net interest and other income of $3.2 million for the first quarter of 2000. In
prior periods, interest income from short-term investments and realized gains
from sales of strategic investments have exceeded our interest expense from
convertible debt and capital leases. However, due to the increase in capital
lease balances and the decrease in short-term investments and strategic
investments, interest and other expense exceeded interest and other income
during the first quarter of 2001. We expect interest and other expense to
increasingly exceed interest and other income in the future.

Write-down of other investments

   We recorded impairment write-downs of other investments of $13.4 million for
the first quarter of 2001, including write-downs related to publicly held
investments of $6.9 million recorded against unrealized losses included in
accumulated other comprehensive income and write-downs related to privately
held investments of $6.5 million recorded directly against other investments.
The impairment write-downs related to publicly held investments resulted from
our conclusion that declines in the fair market values of certain investments
below their carrying values were not temporary (generally, the fair market
values were below the carrying values for a continuous period of six months or
more). The impairment write-downs related to privately held investments
resulted from our conclusion that the carrying values of certain investments
were not recoverable, based on indicators such as limited liquidity and poor
prospects for additional financing.

Equity share of losses of affiliated companies

   Affiliated companies, which we consider to be related parties, include our
joint ventures that distribute the @Home and Excite service internationally and
Work.com, an Internet portal aimed at small and medium-sized businesses. Our
Work.com joint venture discontinued operations on March 31, 2001 as a result of
the current decline in online advertising spending. We invested $15 million in
this joint venture in April 2000 and we have fully reduced this investment by
our equity share of the joint venture's losses through March 31, 2001. Our
ownership interests in these joint ventures generally range from 15% to 50%,
with the exception of Excite

                                       24
<PAGE>

Japan and Excite UK. Although our ownership interests in the Excite Japan and
Excite UK joint ventures exceed 50%, because our majority voting rights are
restricted in certain respects by approval, veto, or participatory rights
granted to the minority shareholders, these joint ventures have not been
consolidated in our financial statements. Our equity share of losses of
affiliated companies increased by 184% to $13.7 million for the first quarter
of 2001 from $4.8 million for the first quarter of 2000. The increase was
primarily due to our equity share of losses in Work.com as discussed above. We
expect to continue to record losses related to our equity share in affiliated
companies, excluding Work.com, in the future.

Income taxes

   Due to operating losses incurred since inception, we did not record a
provision for income taxes for the first quarter of 2001 or 2000. A valuation
allowance has been recorded for the net deferred tax assets as of March 31,
2001 and 2000, since we lack an earnings history. Accordingly, we have not
recorded any income tax benefit for net losses incurred for any period from
inception through March 31, 2001.

Net loss

   Our net loss increased by 23% to $832.6 million for the first quarter of
2001 from $676.5 million for the first quarter of 2000. The increase in our net
loss was primarily due to the write down of goodwill, other intangible assets
and other assets of $600.1 million, a decrease of $31.2 million in our
Media/Advertising revenues, and an increase in operating costs of $35.4 million
related primarily to our Consumer Access and Commercial Services segments as a
result of our efforts to stabilize, scale and improve the reliability of our
broadband network, offset by a decrease of $540.3 million in the costs and
amortization of goodwill, other intangible assets and other assets. We will
continue to generate net losses in the foreseeable future primarily due to the
significant non-cash charges associated with the costs and amortization related
to acquisitions and distribution agreements. The amount of future net loss or
income before such costs and amortization will depend on the level of our
future revenues and the operating costs required to generate those revenues.

Liquidity and Capital Resources

   Our cash position has deteriorated more rapidly than we previously
anticipated since the end of the first quarter of 2001 due in large part to
accelerating weakness in the demand for online advertising and marketing
services. On April 17, 2001, we announced that we are taking several immediate
measures to conserve cash and raise additional funds. These measures include
expense reductions; a non-binding Letter of Agreement with AT&T providing for
an outsourcing arrangement and replacement of our backbone fiber agreement with
AT&T in connection with a leasing arrangement under which AT&T would provide us
with $75 million to $85 million in cash; debt and/or equity financing from
third parties, or financing through other mechanisms; and the potential sale or
restructuring of media operations not directly supporting our broadband
strategy. If we do not achieve our targeted expense reductions and raise at
least $75 million to $80 million in cash by June 30, 2001, there would be a
material adverse impact on our operations and liquidity in the short term. With
respect to the remainder of 2001, if the above measures are insufficient to
fund our operations until our operations generate positive cash flows, we will
be required to seek additional financing. There can be no assurance that we
will be successful in achieving our targeted expense reductions or achieving
positive cash flows, completing the definitive agreements contemplated by the
Letter of Agreement with AT&T, or otherwise raising sufficient additional funds
to finance our operations on a timely basis. The trading price of our Series A
common stock and the downturn in the U.S. stock and debt markets generally make
it more difficult for us to obtain financing through the issuance of equity or
debt securities. Financing may not be available on terms acceptable to us or at
all. Please also see "Risk Factors--Risks Related to Our Business Generally."

   Since our inception, we have financed our operations primarily through
private and public sales of equity securities and convertible debt securities
and capital lease and other financing arrangements. As of March 31, 2001, our
principal source of liquidity was approximately $104.5 million of cash, cash
equivalents and short-term investments, compared with $502.3 million as of
March 31, 2000. Our short-term investments consist

                                       25
<PAGE>

predominantly of debt instruments that mature in less than one year, are highly
liquid and have a high-quality investment rating. We intend to make our short-
term investments available, if and when needed, for operating purposes.

   The following represents the summary of our cash flows as of the end of and
for the first quarter of each year indicated (dollars in thousands):

<TABLE>
<CAPTION>
                                                     2001    Change    2000
                                                   --------  ------  --------
<S>                                                <C>       <C>     <C>
Cash and cash equivalents (including restricted
 cash) at the end of the period................... $ 90,064   (55)%  $201,513
Cash provided by (used in) operating activities...  (21,739)  n/a       6,904
Cash provided by (used in) investing activities...   28,776   n/a     (64,933)
Cash provided by (used in) financing activities...  (15,620)  n/a      34,994
</TABLE>

Operating Activities

   Cash used in operating activities for the first quarter of 2001 was $21.7
million compared to cash provided by operating activities of $6.9 million for
the first quarter of 2000. The net increase in cash used in operating
activities of $28.6 million was primarily due to the increase in net loss
excluding non-cash charges of $57.5 million for the first quarter of 2001 as
compared to 2000, offset by an increase in cash provided from accounts
receivable and other operating assets and liabilities of $28.9 million. The
increase in net loss excluding non-cash charges for the first quarter of 2001
as compared to 2000 was primarily due to operating costs increasing at a faster
rate than revenues.

   Cox and Comcast could claim in the future that they are entitled to delay
payments equal to 20% to 60% of the amounts each company owes to us under our
distribution agreements until we enter into service level agreements with these
companies which require our network to achieve specified performance targets.
This could result in a decrease in our future cash inflows. Please refer to the
Transition Service Level Plan that was filed on April 3, 2000 with our current
report on Form 8-K.

Investing Activities

   Cash provided by investing activities for the first quarter of 2001 was
$28.8 million compared to cash used in investing activity of $64.9 million for
the first quarter of 2000. The increase in cash provided by investing
activities for the first quarter of 2001 as compared to 2000 was due primarily
to the net sales and maturities of short-term investments of $87.6 million for
the first quarter of 2001 as compared to the insignificant activity related to
short-term investments for the first quarter of 2000. We anticipate that we
will use cash in our investing activities in the future due primarily to
capital expenditures for facilities and equipment to support expansion of our
business and network operations.

Financing Activities

   Cash used in financing activities for the first quarter of 2001 was $15.6
million compared to the cash provided by financing activities of $35 million
for the first quarter of 2000. The increase in cash used in financing
activities for the first quarter of 2001 as compared to 2000 was due primarily
to the proceeds from the issuance of common stock upon exercise of stock
options of $5.1 million for the first quarter of 2001 as compared to $47
million for the first quarter of 2000. In addition, payments on capital lease
obligations were $20.7 million for the first quarter of 2001 as compared to $12
million for the first quarter of 2000. We anticipate that payments on capital
lease obligations will increase in the future as we finance the purchase of
network equipment to support expansion of our business.

Commitments

   As of March 31, 2001, we had commitments under our capital leases and other
equipment financings to repay $155.5 million plus interest over the next 36
months with $79 million of this amount due within 12 months.

                                       26
<PAGE>

   Under our $500 million of convertible subordinated notes issued in December
1999, we are required to make annual interest payments of $23.8 million. These
notes mature in December 2006. Annual interest payments on our $437 million
convertible subordinated debentures that mature in December 2018 are
$2.3 million.

   Under our joint venture agreements, we may be required to make periodic cash
contributions to fund joint venture operations to avoid dilution, and we have a
remaining commitment to contribute up to $3.8 million under our At Home Japan
joint venture agreement.

   Our corporate headquarters, including recently constructed facilities,
consist of approximately 670,000 square feet in Redwood City, California, which
we occupy under 12 to 15 year leases. In addition, we have entered into leases
for additional nearby facilities comprised of approximately 250,000 square
feet. Total annual rental payments for facilities with remaining lease term
over one year were approximately $30 million as of March 31, 2001. In addition,
we had commitments for leasehold improvements related to additional facilities
under construction of $13.4 million as of March 31, 2001.

Impact of Adoption of New Accounting Standards

   On February 14, 2001, the FASB issued a limited revision of its September 7,
1999 Exposure Draft, "Business Combinations and Intangible Assets", that
proposes to significantly change the accounting for goodwill acquired in a
purchase business combination. Under the revised proposal, goodwill would not
be amortized but would be reviewed for impairment, using a complex methodology
different from the original proposal, when an event occurs indicating the
potential for impairment. Goodwill impairment charges would be presented as a
separate line item within the operating section of the income statement. The
nonamortization approach would apply to previously recorded goodwill as well as
goodwill arising from acquisitions completed after the application of the new
standard. Amortization of the remaining book value of goodwill would cease and
the new impairment-only approach would apply. The FASB expects to release the
final statement in June 2001. The provisions of the proposed statement are to
be applied at the beginning of the first fiscal quarter following its issuance.

                                       27
<PAGE>

Risk Factors

   The risks described below are not the only ones facing our company. We have
also described additional risks facing our company in our annual report on Form
10-K for the year ended December 31, 2000. Additional risks not presently known
to us, or that we currently deem immaterial, may also impair our business
operations. Our business, financial condition or results of operations could be
seriously harmed by any of these 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.

Risks Related to Our Business Generally

We will need financing to support our operations in the future, and financing
may not be available to us on favorable terms or at all.

   Our cash position has deteriorated more rapidly than we previously
anticipated since the end of the first quarter of 2001 due in large part to
accelerating weakness in the demand for online advertising and marketing
services. If we do not achieve our targeted expense reductions and raise at
least $75 million to $80 million in cash by June 30, 2001, there would be a
material adverse impact on our operations and liquidity. We may also need to
seek additional financing to support our operations in the future, depending in
part on whether and when we are able to generate positive cash flow from our
operations. Financing transactions may include the issuance of equity or debt
securities, obtaining additional credit facilities, or other financing
mechanisms. Even if we are able to raise the funds required, it is possible
that we could incur unexpected costs and expenses, fail to collect significant
amounts owed to us, or experience unexpected cash requirements that would force
us to seek alternative financing. We may also need additional cash in the
future to support our investment in the enhancement and expansion of our
network. Depending on market conditions, we may consider alternative financing
even if our financial resources are adequate to meet presently anticipated
business requirements.

   The trading price of our Series A common stock and the downturn in the U.S.
stock and debt markets generally make it more difficult for us to obtain
financing through the issuance of equity or debt securities. Other than our
non-binding letter of agreement with AT&T, which is subject to completion of
definitive documents and other conditions, we currently do not have any
commitments for additional financing and we cannot be certain that additional
financing will be available when and to the extent required, or that, if
available, it will be on acceptable terms. If we cannot raise necessary
additional funds on acceptable terms, there would be a material adverse impact
on our operations and liquidity. We also may not be able to fund expansion,
take advantage of future opportunities, meet our existing debt obligations or
respond to competitive pressures or unanticipated requirements. Further, if we
issue additional equity or debt securities, stockholders may experience
additional dilution or the new equity securities may have rights, preferences
or privileges senior to those of existing holders of our Series A common stock.

Our operating results may fluctuate.

   Our 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, but are not limited to, the following:

  . subscriber growth rates and prices charged by our cable partners;

  . whether our cable partners attempt to adjust payments due to us based on
    network performance, and whether existing customers discontinue their
    service with us based on network performance issues;

  . general economic conditions;

  . the introduction of new products or services by us or our competitors,
    and the integration of new services, features and functionality with
    existing services, such as self-installation kits for the @Home service;

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  . the amount and timing of capital expenditures and other costs relating to
    the expansion of our operations;

  . demand for Internet advertising, including pricing changes for Internet-
    based advertising, changes in the mix of types of advertising we sell and
    the addition or loss of advertisers; and

  . the timely payment of amounts owed to us under advertising agreements.

   In addition, in recent quarters, we have recorded significant write-downs of
goodwill and other intangible asset balances related to our acquisitions, and
we may have to record additional write-downs in the future if we determine that
these assets have suffered additional impairment. We also will have to record
restructuring charges for our workforce reductions.

   Our Internet advertising revenue has decreased significantly during the past
few calendar quarters. The downturn in the U.S. economy and the decline in the
demand for Internet advertising create uncertainty as to whether we will meet
our projected advertising revenues for the remainder of 2001. In addition, our
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.

   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. Due to all of the
foregoing factors and the other risks described in this section, you should not
rely on period-to-period comparisons of our results of operations as an
indication of future performance. 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 trading price of our Series A common
stock may fall.

General economic conditions may prevent us from meeting our subscriber
forecasts and targeted subscriber and advertising revenues.

   Decisions by consumers and our business customers to subscribe to our
broadband services are to some extent discretionary. The slowdown in the U.S.
economy may cause consumers and business customers to defer decisions to open
new subscriptions, or could lead our cable partners to reduce their investments
in upgrading their cable infrastructure to support our broadband services and
in marketing to attract new subscribers. In addition, we expect our advertising
revenues to decrease due to weakening demand for Internet advertising. As a
result, there is increased uncertainty with respect to our targeted revenues
for the remainder of 2001, and any resulting decrease in demand or supply of
our broadband and advertising services could have a material adverse effect on
our revenues and operating results.

In light of our financial condition, our business partners may terminate their
relationships with us or seek to make the terms of their relationship with us
less favorable, which could impact our ability to conduct our business.

   We have agreements and relationships with many third parties, including
equipment suppliers, network engineering, management and maintenance
consultants, providers of telecommunications circuits and other service
providers that are integral to conducting our day-to-day operations,
particularly with respect to maintaining the performance of our network and
offering the @Home service. These service providers may perceive that there is
increased risk in doing business with us due to our current financial position.
Providers of network equipment may cease to finance our purchases of equipment
or may require cash-only payments for equipment in the future, which could
negatively impact our cash flows. Also, if we are unable to make payments on a
timely basis, our service providers may terminate their arrangements or
relationships with us, and this would make it more difficult for us to conduct
our business.

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<PAGE>

We have incurred and expect to continue to incur substantial losses.

   We have incurred net losses in every fiscal period since our formation in
1995. As of March 31, 2001, we had an accumulated deficit of $10 billion, a
substantial portion of which is related to amortization and write-down of
goodwill and other acquired intangible assets since our inception. In addition,
we currently intend to incur significant capital expenditures and operating
expenses in order to enhance the performance of our network, expand our network
and market and provide our broadband services to potential subscribers. As a
result of our past acquisitions of Excite, iMALL, Bluemountain.com and other
companies, we will incur substantial non-cash charges in future periods,
including charges relating to the amortization of goodwill and other intangible
assets. In recent quarters, we have recorded significant write-downs of these
intangible assets, and we may have to record additional write-downs in the
future if we determine that these assets have suffered additional impairment.
Therefore, we anticipate that we will continue to incur significant net losses
for the foreseeable future.

Our substantial debt leverage and debt service obligations may adversely affect
our cash flow and ability to obtain additional financing.

   We have substantial amounts of outstanding indebtedness, primarily from our
convertible subordinated debentures due 2018 and our 4 % convertible
subordinated notes due 2006. We may be unable to generate cash sufficient to
pay the principal of, interest on and other amounts in respect of our
indebtedness when due. As of March 31, 2001, the total principal amount subject
to repayment for outstanding debt was $942 million. Our substantial leverage
could have significant negative consequences, including:

  . increasing our vulnerability to general adverse economic and industry
    conditions;

  . limiting our ability to obtain additional financing;

  . requiring the dedication of a substantial portion of our expected cash
    flow from operations to service our debt, thereby reducing the amount of
    our expected cash flow available for other purposes, including capital
    expenditures;

  . limiting our flexibility in planning for, or reacting to, changes in our
    business and the industry in which we compete; and

  . placing us at a possible competitive disadvantage compared to less
    leveraged competitors and competitors that have better access to capital
    resources.

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 and experienced employees. Competition for experienced
management, engineering and other key personnel is intense, particularly in the
market segment in which we compete and in the San Francisco Bay area where our
headquarters is located.

   We grant stock options as a method of attracting and retaining employees, to
motivate performance and to align the interests of management with those of our
stockholders. Due to the decline in the trading price of our common stock
during 2000 and early 2001, a substantial portion of the stock options held by
our employees have an exercise price that is higher than the current trading
price of our common stock. We may elect to reprice or otherwise adjust the
terms of these stock options, grant additional stock options at the current
lower market price, pay higher cash compensation, or some combination of these
alternatives to retain and attract qualified employees, but we cannot be sure
that any of these actions would be successful. If we issue additional stock
options, this would dilute existing stockholders. Also, in January 2001 and
April 2001 we announced reductions in workforce and in April 2001 we also
announced that we intend to sell or restructure media operations not directly
supporting our broadband strategy. This may create concern about job security
among existing employees that could lead to increased turnover. As a result of
these factors, we may have difficulties in retaining current employees and
attracting new employees.

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<PAGE>

   We believe that our success will depend on the continued services of our
executive management team. In addition, other key employees possess marketing,
technical and other expertise which is important to the operations of our
business. All of our executive officers and other employees serve "at-will" and
may elect to pursue other opportunities at any time. If any of these employees
leave, we may not be able to replace them with employees possessing comparable
skills.

Our management team must successfully integrate new members and must manage our
workforce reductions in order for our business to be successful.

   We face challenges in managing our operations due to the addition of new
members to our management team and due to our recent reductions in workforce.
In particular, in April 2001, Patti Hart replaced George Bell as our new
Chairman and Chief Executive Officer. New members of our management team may
bring management styles, philosophies and policies that could take time to
implement. In addition, as a result of our recent reductions in workforce we
will need to operate with fewer employees and existing employees will have to
perform new tasks previously performed by former employees.

We are controlled by AT&T, and our interests may not always align with AT&T's
interests.

   AT&T controls approximately 74% of our voting power, and upon the completion
of the put exercises by Comcast and Cox, may control up to 79% of our voting
power. AT&T is currently in discussions to renegotiate the terms of the put
options which may result in different numbers of shares being exchanged.
Currently, six of our nine directors are directors, officers or employees of
AT&T or its affiliates. AT&T currently owns all 86.6 million 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 a majority of our
board of directors. Therefore, we are subject to both board and stockholder
voting control by AT&T. It is possible that AT&T's objectives will diverge from
ours. In October 2000, AT&T announced that it will restructure its operations
into four separate companies or business groups and AT&T's interest in
Excite@Home will be held by one of these companies or business groups. We
cannot predict what impact, if any, this restructuring may have on our company.

Risks Related to Our Broadband Business

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 and the rate at which we add new subscribers to the
@Home service and our broadband content services may differ from our forecasts.
We may not be able to increase our subscriber base enough to meet our internal
forecasts, the forecasts of industry analysts or the expectations of investors.
The slowdown in the U.S. economy may lead to reduced demand for our broadband
services, or could lead our cable partners to reduce their investments in
upgrading their cable infrastructure to support our broadband services and in
marketing to attract new subscribers. The rate at which subscribers have
increased in the past does not necessarily indicate the rate at which
subscribers may be expected to grow in the future. If we do not meet these
subscriber forecasts, our revenues and operating results could be materially
harmed, and the trading price of our Series A common stock may fall.

Our relationships with our cable partners are critical to the success of our
broadband business.

   We generally are dependent on cable companies to provide the @Home service
since the cable companies' local networks are required to deliver the service
to residential homes. The cable infrastructure was originally designed to
handle one-way data transmission, and we are not able to offer the @Home
service until cable companies upgrade their networks to HFC cable with the
ability to handle two-way high-speed data transmission. We have entered into
distribution agreements with AT&T, Comcast, Cox and other cable partners to
offer a co-branded version of the @Home service to their customers, and we
receive from our cable partners a percentage of the fees paid by their
customers that subscribe to the @Home service. If our relationships with

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<PAGE>

one or more of these cable partners were to terminate or diminish, we may not
be able to offer the @Home service to the customers served by those cable
companies on a cost-effective basis, or at all, and our business and operating
results would be materially harmed.

If we cannot maintain the reliability, scalability and speed of our broadband
network, customer demand for our broadband services and our relationships with
our cable partners will suffer.

   The satisfactory performance, reliability and availability of our broadband
network is critical to our ability to attract and retain large numbers of
subscribers. Broadband networks face performance challenges that are different
from traditional data and telecommunications networks. Because the @Home
service offers high transmission speeds, our users are more likely to transfer
large amounts of data, such as multimedia applications, over our network. In
addition, because the @Home service is always-on, users perform some tasks,
such as checking e-mail, much more frequently than narrowband users. As the
number of subscribers to our service increases and as broadband applications
are developed that require the transfer of large amounts of data
simultaneously, the performance of our network may decrease. Also, our network
performance may suffer in particular geographic areas due to our reliance on
regional data centers and the cable infrastructure located in those areas to
support our broadband services. If the existing infrastructure for a particular
geographic area does not accommodate additional subscribers, and if our cable
partners are unwilling to upgrade the cable infrastructure in such areas,
network performance for such areas could decline.

   In recent periods, the performance of our broadband network has deteriorated
in some markets. For example, we recently suffered performance problems with
our e-mail services. In addition, although we have implemented policies to
restrict our subscribers from inappropriate use of the @Home service, such as
uploading excessive amounts of data, some of our subscribers have not adhered
to these policies, and this has contributed to performance problems with our
network. If we experience frequent or persistent degradation in system
performance, our reputation and brand could be permanently harmed, and we may
lose subscribers. Consumer litigation against us and/or our cable partners may
arise as a result of network performance problems, and our cable partners may
seek indemnification from us for damages in the event of such consumer claims.

   Because we rely on our cable partners to offer the @Home service to
customers, if our network does not perform to the levels that our cable
partners demand, our relationships with our cable partners will suffer. Some of
our cable partners have asserted that our network is not performing up to their
expectations, and Cox has delayed payments due to us under our distribution
agreement on this basis. We are currently negotiating service level agreements
with Cox and Comcast, under which we may be obligated to pay damages if our
network does not meet specified performance targets. Cox and Comcast could
claim in the future that they are entitled to delay payments equal to 20% to
60% of the amounts each company owes to us under our distribution agreements
until we enter into these service level agreements. This could result in a
decrease in our cash inflows. If the @Home service does not meet the
reliability levels that our cable partners seek, they may choose not to offer
the service or may attempt to terminate their relationships with us.

If our cable partners decide to offer our broadband services at discount prices
or to discontinue their broadband offerings, or if they decide to offer their
own broadband services in the future, our operating results will be harmed.

   Although our cable partners have agreed not to carry services that compete
with our broadband services, they are generally under no affirmative obligation
to offer any broadband services at all. Additionally, our cable partners can
generally price our broadband services at their discretion. Because our
agreements with each of our cable partners provide that we will receive a
percentage of the revenues that our cable partners receive from sales of our
broadband services, if our cable partners offer our broadband services at
discount prices, we will receive less revenue.

   In addition, our cable partners may determine in the future that they can
provide broadband services themselves, rather than offering our services. If
they reduce their reliance on our broadband access services, we

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<PAGE>

may receive a smaller percentage of broadband access subscription fees
collected by them. For example, Cablevision has deployed our service to only a
small number of subscribers and continues to offer its own online service
called Optimum Online to the majority of subscribers in cable systems deployed
to date. On April 23, 2001, we announced that we are formally seeking the
termination of our relationship with Cablevision. In addition, our March 28,
2000 letter agreement provides for an implementation plan that would, at the
election of Comcast or Cox, require us to transfer specified subsystems and
network elements to Comcast or Cox to enable them to offer aspects of the @Home
service themselves, in which event we would negotiate a new revenue split to
reflect any expenses that are no longer incurred by us due to the transfer. The
agreement also provides for an exit plan that would, in the event that either
Comcast or Cox decides to terminate its relationship with us, require us to
transfer to Comcast or Cox specified assets used by us in delivering our
broadband services to them. The agreement also provides that Comcast and Cox
can terminate their exclusivity obligations with us after June 4, 2001 by
giving proper notice. If Comcast or Cox, or other cable partners, attempt to
offer broadband services similar to our own, we may lose customers served by
these companies, which could materially harm our business and operating
results.

We could face significant competition in the event that other companies offer
broadband Internet access services over our cable partners' cable systems upon
the termination or expiration of our exclusivity arrangements, or if our cable
partners are mandated to do so through "open access" regulation.

   Most of our cable partners are currently 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
Excite@Home. The current exclusivity obligations of AT&T, Comcast, Cox and
Cablevision expire on June 4, 2002, and may be terminated sooner under some
circumstances, most notably after June 4, 2001 by Comcast or Cox by providing
us with proper notice. Even if our relationships with these cable partners
continue, these cable partners may allow alternative providers to offer
broadband Internet access services over their cable infrastructure. In
addition, the Federal Communications Commission, or state or local governments,
could impose regulations which require our cable partners to grant competitors
access to their cable systems. As a result, we could lose potential new or
existing subscribers, distribution relationships and ultimately revenue to
competitors in a voluntary or regulation-mandated open access environment.

   The markets for consumer and business broadband services are already
extremely competitive, and we expect that competition will intensify in the
future. Our most direct competitors for broadband services include providers of
cable-based Internet services such as AOL Time Warner, telecommunications
providers of services such as DSL, fixed wireless Internet access providers
such as Sprint Broadband, satellite Internet access providers such as Hughes
Network System, cable and fiber-optic system over-builders such as RCN Corp.
and Internet and online service providers. For a more detailed description of
these groups of competitors, see our annual report on Form 10-K filed with the
Securities and Exchange Commission on April 2, 2001 under the section entitled
"Business--Competition." These competitors currently provide alternative
services, in many cases over different communications media, but could compete
with us directly in the business of broadband Internet access services over the
cable infrastructure in an open access environment.

   Some of these competitors and potential competitors have substantially
greater financial, technical and marketing resources, larger subscriber bases,
longer operating histories and/or more established relationships with
advertisers and content and application providers than we do. In particular,
because our cable partners provide the @Home service to consumers, our
competitors may have greater brand name recognition. 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 we can. We may not be able to compete successfully against
current or future competitors. Competitive pressures could significantly impact
the growth of our broadband subscriber base and our ability to renew and enter
into new distribution agreements and as a result may harm our business.

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<PAGE>

The equity incentives that we have granted to our cable partners might not have
the effect that we anticipated.

   Many of the warrants that we have granted to our cable partners have
exercise prices that are greater than the current trading price of our common
stock. As a result, these warrants may not sufficiently motivate these cable
partners to maintain or extend their relationships with us. In particular, the
warrants that we granted to Comcast and Cox under our March 28, 2000 letter
agreement have exercise prices that are substantially above the current trading
price of our common stock. In addition, under the letter agreement, AT&T
granted Comcast and Cox "put" rights to sell their shares to AT&T, and Comcast
and Cox recently announced that they intent to exercise these rights. As a
result, Comcast and Cox may be less likely to continue or extend their
relationships with us.

We depend on our cable partners to upgrade to the two-way cable infrastructure
necessary to support the @Home service.

   The ability of a subscriber to receive the @Home service depends in large
part on whether the cable company in its area has upgraded its cable network to
support two-way high-speed data transmission. Only a portion of existing cable
plants in the United States and in some international markets have been
upgraded to two-way hybrid fiber-coax cable, and even less are capable of high-
speed two-way data transmission. As of March 31, 2001, approximately 61% of our
North American cable partners' cable infrastructure was capable of delivering
the @Home service. The efforts by our cable partners to upgrade their cable
networks places 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 may 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 significantly harm our business.

We depend on our cable partners to promote our services and obtain new
subscribers.

   Because we do not offer the @Home service directly to customers, the rate at
which we are able to obtain new subscribers depends on the level and
effectiveness of the efforts of our cable partners to promote our broadband
services in particular regions. Our cable partners have achieved different
levels of subscriber penetration. 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.

If we are unable to make it easier and quicker to install the @Home service,
this may constrain our subscriber growth, but increased purchases of cable
modems by subscribers choosing to self-install the @Home service may negatively
impact our revenue.

   Installation of the @Home service generally requires a customer service
representative employed by a cable partner to install a cable modem at a
customer's location and therefore can be time consuming. We believe that our
ability to meet our subscriber goals depends on the degree to which self-
installation initiatives and cable modems become more widely available in
channels such as personal computer manufacturers and retail outlets. In
addition, we must deploy systems that allow customers to self-provision the
@Home service through online and other means to increase the attractiveness and
usefulness of self-installed cable modems. If

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these developments do not occur, it would be difficult for us to attract large
numbers of additional subscribers. In addition, subscriber growth could be
constrained and our business could be significantly harmed if our cable
partners slow the deployment of the @Home service because they are not able to
obtain a sufficient quantity of cable modems.

   Cable modem manufacturers have experienced, and may continue to experience,
production and delivery problems with cable modem components that may restrict
the number of modems available. Cable modem manufacturers may also delay the
production or delivery of cable modems for various economic or other reasons.
Delays due to component shortages or other reasons could materially impact our
subscriber growth.

   The amount of revenue that we receive for the @Home service depends on the
price that our cable partners charge subscribers, and many of our cable
partners charge a lower fee to subscribers that purchase their own cable modems
rather than rent them from the cable partner. We expect that broader deployment
and adoption of self-installation initiatives will result in a larger
proportion of subscribers purchasing cable modems. This may result in lower
average revenue per subscriber in future periods.

Our broadband business is unproven, and it may not achieve profitability.

   We have made significant up-front investments in our backbone network and
supporting network facilities in order to offer the @Home service and our
broadband content services. Whether or not our broadband business will achieve
profitability is dependent on several factors, most notably our ability to
maintain our relationships with our cable partners, the ability of our cable
partners to achieve a large subscriber base and the price that these
subscribers pay for the service. In addition, our costs are not entirely fixed,
and we incur incremental costs with each additional subscribers in order to
meet expected network performance and customer service levels. Our broadband
operations have not generated sustained positive cash flows since our
inception, and we cannot guarantee you that we will be able to achieve positive
cash flows on a timely basis or at all.

We face litigation risks due to our relationships with our cable partners.

   We currently face litigation in multiple class action suits arising out of
our relationships with our cable partners. If we do not prevail in these
matters, we could be forced to pay damages, allow other service providers to
use our network, or we may not be allowed to proceed under the terms of our
March 28, 2000 letter agreement with our cable partners. For a summary of the
most significant of these litigations, please refer to "Legal Proceedings"
under Item 1 of Part II of this report and under Item 3 of our annual report on
Form 10-K filed with the Securities and Exchange Commission on April 2, 2001.
Other parties could file litigation based on similar or other legal theories in
the future. Lawsuits filed against us could divert the attention of management
and key personnel, could be expensive to defend and may result in adverse
settlements and judgments.

Our dependence on our network to provide our broadband services exposes us to a
significant risk of system failure.

   Our broadband service operations are dependent on the uninterrupted
operations of our highly complex network infrastructure and large numbers of
computer and communications hardware and software systems. These systems are
vulnerable to damage or interruption from fires, earthquakes, floods, power
losses, telecommunications failures and similar events. In particular,
California is experiencing an energy shortage and some regions have experienced
blackouts and may experience blackouts in the future. We have principal
facilities, including our headquarters and one of our network operations
centers, located in California. The occurrence of a natural disaster or other
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

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<PAGE>

interruptions in our broadband services. Any damage or failure that causes
interruptions in our network operations could result in a loss of subscribers
or consumer litigation.

We depend on telecommunication companies to provide local and regional data
circuits, and these companies may experience financial or other difficulties
that adversely affect the price or availability of such circuits.

   Delivering our commercial broadband services requires that we rent local and
regional data lines and facilities from local exchange carriers and wholesale
communication providers. In some areas, our residential broadband services also
rely on regional data lines connecting our backbone to the cable headend. A
number of telecommunication providers have recently changed their business
plans in reaction to market conditions, which may prevent us from maintaining
or expanding our services in accordance with our plans. As a result, we may be
required to seek alternative partners under terms that are less favorable than
current terms, or we may have to delay or curtail plans to expand our
commercial broadband services.

Risks Related to Our Media Business

We and other Internet advertisers have experienced a recent softening in the
demand for Internet advertising services, and if we are unable to grow or
maintain our Internet advertising revenues, our operating results would be
harmed and our stock price may decline.

   We derive a significant portion of our revenues from the sale of advertising
on our web sites. We have recently experienced a rapid deterioration in the
demand for our advertising services due to the slowdown in the U.S. economy,
decreased corporate spending and difficulties in measuring the effectiveness of
Internet advertising. We have attempted to increase our marketing of
advertising services towards companies in traditional lines of business rather
than Internet companies, but advertisers that have traditionally relied upon
other media may be reluctant to advertise online, or may not be willing to pay
the same rates as Internet companies. Furthermore, we have recently introduced
a pricing structure for advertising on our broadband services at premium rates,
but we cannot be certain whether advertisers will be willing to pay for these
services. If we are unable to convince advertisers of the effectiveness of
Internet advertising, particularly our premium services, or if the demand for
Internet advertising remains sluggish due to a weak U.S. economy, our revenues
and operating results could be materially harmed.

Our announcement that we intend to sell or restructure portions of our media
operations may have a material adverse impact on our operating results and cash
flows.

   On April 17, 2001, we announced that, as one of several measures to conserve
cash and raise additional funds, we intend to sell or restructure portions of
our media operations which do not directly support our broadband strategy. This
announcement could impact our ability to operate our narrowband media business
in several ways:

  . Customers may be reluctant to enter into new long-term advertising
    arrangements with us.

  . It may become more difficult for us to continue our relationships with,
    or to collect amounts due from, existing advertising customers.

  . Potential partners may be reluctant to enter into new strategic
    relationships with us.

  . We may experience higher employee turnover due to concerns about job
    security and uncertainty about the future of this business.

   Any of these factors could ultimately result in a material adverse impact to
our operating results and cash flows. We cannot assure you that we will be able
to sell these operations, in which case we may have to shut them down.

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<PAGE>

We may not receive all payments owed to us under our advertising arrangements.

   Although we are attempting to target our advertising services towards new
customers in more traditional non-Internet lines of business, a significant
portion of our current advertising arrangements are with Internet companies.
Many of these Internet companies are not yet profitable. With the recent
downturn in the economy generally and in the technology sector in particular,
many Internet companies have been unable to attract venture capital funding to
support their operations and are therefore shutting down operations. As a
result, we may not receive all of the payments owed to us under our current
advertising arrangements, which could materially harm our results of operations
in the future.

Our media services could lose users, advertisers and revenues to competitors.

   Our media services compete with a number of companies both for users and
advertisers and, therefore, for revenues. We compete with Internet portals,
online service providers, media companies such as AOL Time Warner and providers
of online information and other services. For a list of these competitors,
please see "Business--Competition" in our annual report on Form 10-K filed with
the Securities and Exchange Commission on April 2, 2001. Increased competition
for users of Internet services and content may result in lower subscriber
growth rates for our online and Internet services and lower advertising rates
and decreased demand for advertising space on our web sites.

   Many of our competitors for Internet advertising have longer operating
histories in the Internet market, greater name recognition, larger customer
bases and significantly greater financial, technical and marketing resources
than we have. 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 media 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 usage of Internet portal sites by Internet users declines, 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. Some
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 as measured by unique
users, reach and pages views. As a result, the number of advertising
impressions and the attractiveness of our sites to advertisers could be
impacted, which would harm our media and advertising revenues.

The sponsorship advertising we sell subjects us to financial and other risks.

   We derive a substantial portion of our advertising revenues from sponsorship
and promotion 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, that third party
sponsors do not meet their payment obligations under these agreements, or that
they 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.

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<PAGE>

   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 other 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 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 our websites, including agreements for links to our services to be
placed on high-traffic web sites and agreements for third parties to provide
content, games and e-mail for our web sites. We have no guarantees that we will
recoup our investments in these relationships through additional users or
advertising revenues, and we may have to pay penalties for terminating
agreements early. Some of these third parties could become our competitors, or
provide their services to our competitors, upon termination of such
relationships. If these relationships are terminated and we are not able to
replace them, we could lose users or advertisers.

New technology could make it more difficult for us to deliver online
advertising.

   "Filter" software programs that limit or prevent advertising from being
delivered to a web user's computer are available. Filter software may prevent
the proper operation of our services, including the personalization features of
the Excite Network and targeted banner advertising. Widespread adoption of
software products such as these could reduce the attractiveness of our
personalization features and harm the commercial viability of online
advertising.

Current or future legislation addressing privacy concerns, litigation or
technology could make it more difficult for us to deliver targeted advertising
or generate revenues from the collection and use of user information.

   Cookies are bits of information keyed to a specific memory location and
passed to a web server through the user's browser software. They are placed on
a user's hard drive, often without the user's knowledge or consent. Our
services use cookies to deliver targeted advertising, enable the
personalization features of the Excite Network, help compile demographic
information about users and limit the frequency with which an advertisement is
shown to the user. In addition, we collect information from users to enable us
to activate the personalization features of the Excite Network and for
authentication and identification purposes, as well as through other online
services such as promotional sweepstakes offered by our MatchLogic subsidiary,
and we may with user permission sell this information to third parties or use
this information for other purposes. These practices may subject us to risk of
litigation or regulation related to the collection and use of this information,
as well as other misuses such as unauthorized marketing.

   For example, in the fourth quarter of 2000, a purported class action suit
was filed against our MatchLogic subsidiary, alleging unauthorized access to,
as well as interception and misuse of, customer data based on our advertising
targeting technology. In addition, the Federal Trade Commission and some states
have been investigating Internet companies regarding their use of personal
information, and some groups have initiated legal action against Internet
companies regarding their privacy practices. 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 government agencies choose to investigate our
privacy practices. Also, currently available web browsers allow users to hide
their identity and to prevent cookies from being written to, or read from, the
user's hard drive, and technology that shields e-mail addresses, cookies and
other electronic means of identification could become commercially accepted.
Any reduction or limitation in the use of personal information or cookies
through legislation, new technology or otherwise could limit the effectiveness
of our ad targeting, which could harm our business.

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<PAGE>

We may face potential liability from our 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 the
advertised products and services. In other advertising relationships, we are
compensated based on the number of times users view the advertisements on our
web sites. These arrangements may expose us to legal claims based on the
content of the advertisements or the association of the advertisement with
specific web searches conducted by users. 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.

   Some of the liabilities that may result from the above arrangements include:

  . claims that advertisements displayed on our web sites infringe third
    party intellectual property rights or are false, misleading or
    defamatory;

  . 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.

We may lose users, advertisers and revenue if we experience system failures on
our narrowband services.

   Our web sites on 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 on 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 make
available 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 users of Excite Network services depend on Internet service
providers, online service providers and other web site operators for access to
the Excite Network. Each of these parties has experienced significant outages
in the past, and could experience outages, delays and other difficulties due to
system failures unrelated to our systems. In particular, California is
experiencing an energy shortage and some regions have experienced blackouts and
may experience blackouts in the future. We and many of our third party
providers have principal facilities located in California. These types of
occurrences could cause users to perceive the Excite Network as not functioning
properly and therefore cause them to use other services.

Additional Risks Facing Our Business

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. This need will intensify in the event
that alternative providers begin offering broadband Internet access and/or
content services over the cable systems of our cable partners in an open access
environment. Promoting and positioning our brands will depend largely on the
success of our marketing efforts and our ability to provide high quality
services. We may

                                       39
<PAGE>

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.

If we do not develop new and enhanced features, products and services for our
media 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,
such as wholesale access services and premium broadband services, in order to
differentiate our services and retain our current users and attract new users.
Acquiring or developing new features, products and services may require a
substantial investment of personnel and financial and other resources. 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 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 their design
significantly to correct these errors. In addition, we must consult with and
involve our 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 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.

International growth is important to our business, but our international
operations are subject to additional risks and may not be successful.

   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. We have made substantial cash investments in many of our international
joint ventures and we may need to provide additional funding to these joint
ventures in the future to maintain their solvency. Some or all of these joint
ventures may never become profitable and should a decision be made to dissolve
them, we would likely lose our entire investment.

   In addition to the uncertainty regarding our ability to generate revenues
from foreign operations and 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.

Our equity investments in other companies may not yield any returns, and may
adversely affect our operating results.

   We have made equity investments in many Internet companies, including joint
ventures in other countries. Our investments in these companies may not yield
any return. Of these companies that now have publicly-

                                       40
<PAGE>

traded stock, a significant portion are currently trading at prices lower than
our original purchase price for the stock. In addition, a substantial portion
of these investments is 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. The recent decline in the stock
market, particularly in the technology sector, has made it less likely that the
stock of private companies will become liquid in the near future through an
initial public offering or an acquisition. We also are required to account for
some of these investments under the equity method of accounting, and therefore
must record a share of the net losses in some of these companies. We have
incurred charges related to write-downs or write-offs of assets with respect to
some of these investments, and may incur additional charges in the future if
these companies are not successful.

We must maintain the security of our networks.

   We have in the past experienced security breaches in our networks. We have
taken steps to prevent these breaches, to prevent users from sharing files via
the @Home service and to protect against bulk unsolicited e-mail. However,
actual problems with, as well as public concerns about, the security, privacy
and reliability of our networks 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 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.

We could face liability for defamatory, indecent or infringing content provided
on our media 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 us from
these types of claims.

   In addition, legislation has been proposed that prohibits, or imposes
liability for, 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 our 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, governments of some foreign countries, such as Germany, 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.

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 if
these types of claims do not result in liability.

                                       41
<PAGE>

We may be subject to intellectual property infringement claims which are costly
to defend and which 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 unfair competition or infringement of copyrights, trademark rights,
trade secret rights or other proprietary rights.

   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 forced to make changes to
the services and products we provide and the way that we provide them.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

   The following discusses our exposure to market risk related to changes in
interest rates, equity prices and foreign currency exchange rates.

Interest Rate Sensitivity

   As of March 31, 2001, we had two issuances of long-term convertible debt
outstanding. The balance of our convertible debentures issued in December 1998,
net of unamortized original issue discount, was $245.4 million as of March 31,
2001 and bears an effective interest rate of approximately 4%. Our convertible
notes issued in December 1999 had an outstanding balance of $500 million as of
March 31, 2001 and bear a fixed rate of interest of 4.75%. In some
circumstances, we may be required to redeem these debt instruments for our
Series A common stock or cash. Because the interest rates on these debt
instruments are fixed, a hypothetical 10 percent increase or decrease in market
interest rates would not have a material impact on us. Increases in market
interest rates could, however, increase the interest expense associated with
future borrowings by us, if any. We do not hedge against interest rate
increases.

Equity Price Risk

   We own shares of privately held and publicly held companies that we classify
as other investments in our consolidated balance sheets. We generally value our
investments in privately held companies at cost. Because many of these
companies are technology startups in an early stage of development and may
never develop into commercially viable businesses, these investments are
inherently risky and we may incur losses related to our investments in these
companies. We value our investments in publicly held companies using the
closing fair market value stated in the Wall Street Journal for the last day of
each month. We write-down our investments in privately held and publicly held
companies when there is a permanent decline in value. We wrote-down $129.5
million of such investments during the year ended December 31, 2000 and an
additional $13.4 million during the first quarter of 2001. The fair market
value of our other investments was $39.8 million as of March 31, 2001, and
these other investments are at risk for further declines in the future in the
fair market value of publicly held investments or the cost basis of privately
held investments. We do not hedge against equity price changes.

Foreign Currency Exchange Rate Risk

   Substantially all of our revenues are realized in U.S. dollars and most of
our revenues are from customers located in the United States. Therefore, our
foreign currency exchange rate risk is substantially limited to funding
commitments to our international joint ventures. Because the timing and amount
of the required contributions is not predictable, we do not typically hedge
against foreign currency exchange rate changes and we did not hold any such
hedges as of March 31, 2001.

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<PAGE>

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

   On March 19, 2001, Pogo.com, Inc., filed suit against us in San Mateo County
Superior Court for alleged breach of a merger agreement under which we were to
acquire Pogo.com in exchange for shares of our Series A common stock. On
January 5, 2001, we notified Pogo.com that we had terminated the merger
agreement in accordance with the provisions of the agreement. The complaint
seeks damages for breach of contract and breach of the implied covenant of good
faith and fair dealing. We believe this action is without merit and intend to
defend against this action vigorously. If we do not prevail in this action, we
may be required to pay substantial damages, which could seriously harm our
business.

   On March 12, 2001, four present and former subscribers of the @Home
broadband Internet service initiated a purported class action suit in
California State Superior Court in San Mateo County against AT&T and us for
unfair business practices, false advertising, misrepresentation, and unjust
enrichment. On April 19, 2001, another subscriber filed a private attorney
general suit in the same court making similar allegations. Plaintiffs claim
that advertising for the @Home broadband Internet service is false, misleading,
and deceptive. In the complaints, plaintiffs seek an injunction prohibiting
certain of our advertising practices, disgorgement of profits, restitution of
monies acquired as a result of the alleged wrongful advertising and business
practices, unspecified compensatory damages, punitive damages, and attorneys'
fees. We believe this action is without merit and intend to defend against this
action vigorously. If we do not prevail in this action, we may be required to
alter our business practices and pay substantial damages, which could seriously
harm our business.

   Allen Ozdemir filed a purported class action on April 29, 1999 against two
of the former officers and directors of iMall for failing to halt or delay a
block sale of restricted iMall stock prior to our acquisition of iMall. On
October 27, 1999, we acquired iMall. On August 28, 2000, the plaintiff amended
his complaint to state two claims for breach of fiduciary duty, claiming that
Messrs. Rosenblatt and Mazzarella owed the purported plaintiff class duties to
halt or delay the stock sale both in their capacity as officers and directors
of iMall and in their capacity as attorneys in fact of the stockholders
participating in the stock transaction. The plaintiff seeks unspecified
compensatory damages, restitution, and punitive damages. The amended complaint
has been answered on behalf of Messrs. Rosenblatt and Mazzarella, denying the
plaintiff's claims. The class certification hearing is set for May 19, 2001. We
believe this action is without merit and the defendants intend to defend
against this action vigorously. If the defendants do not prevail in this
action, they may be required to pay substantial damages. We or iMall could
potentially be obligated to indemnify the defendants against some or all of any
damages awarded, which amount could materially impact our results of operations
and cash position.

   Please also refer to Item 3 of our annual report on Form 10-K for the year
ended December 31, 2000 for a description of other ongoing material legal
proceedings which neither first became a reportable event, nor included any
material development, during the first quarter of 2001.

   We cannot assure you that we will prevail in any litigation. Regardless of
the outcome, any litigation may require us to incur significant litigation
expenses and may result in significant diversion of management.

ITEM 2. Changes in Securities and Use of Proceeds

   Not applicable.

ITEM 3. Default Upon Senior Securities

   Not applicable.

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<PAGE>

ITEM 4. Submission of Matters to a Vote of Security Holders

   Not applicable.

ITEM 5. Other Information

   On April 21, 2001, Patti S. Hart was named President, Chief Executive
Officer and Chairman of the Board of Directors. George Bell, the former holder
of each of these respective positions, resigned from these positions
concurrently.

ITEM 6. Exhibits and Reports on Form 8-K

   (a) Exhibits. The exhibits listed in the accompanying exhibit index are
filed as part of this report.

   (b) Current Reports on Form 8-K.

   Not applicable.

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<PAGE>

                                   SIGNATURES

   Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                          At Home Corporation
                                          (Registrant)

                                                  /s/ Mark A. McEachen
Date: May 15, 2001                        By: _________________________________
                                                     Mark A. McEachen
                                               Executive Vice President and
                                                  Chief Financial Officer
                                               (Principal Financial Officer)

                                                  /s/ Manford Leonard
                                          By: _________________________________
                                                      Manford Leonard
                                                    Vice President and
                                                   Corporate Controller
                                              (Principal Accounting Officer)

                                       45
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
                                             Incorporated by Reference
                                         ---------------------------------  Filed
 Exhibit Number   Exhibit Description    Form File No. Exhibit Filing Date Herewith
 --------------   -------------------    ---- -------- ------- ----------- --------
 <C>            <S>                      <C>  <C>      <C>     <C>         <C>
     10.01      Letter of Agreement,     8-K            99.2    04/19/01
                dated April 17, 2001,
                between the Registrant
                and AT&T Corp.

     10.02      Employment Agreement,                                          X
                dated April 18, 2001,
                between the Registrant
                and Patti S. Hart.*
</TABLE>
--------
* Management contracts or compensatory plans required to be filed as an exhibit
  to this report.

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