America On-Line: will it survive ...? Message Board

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Technology Stocks : America On-Line: will it survive ...?

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To: Todd Daniels who wrote (4994)	10/10/1997 9:47:00 AM
From: steve lipson	of 13594

Todd: I'm surprised at you. Your analysis is usually much more penetrating. MSN at 2.5m subs is on a growth track that will get it to 10m -- um, maybe never. Bleeding red ink, this part of its business is not being valued as a going concern at a multiple to earnings or revenues. The only value the business has is the value of its cusomters as prospects for another vendor. Since AOL can get a customer for $100+, they or anyone else should clearly pay half that or less for a mere prospect list --- so $40 a head sounds like a reasonable valuation per subscriber in the wholesale market. AOL, on the other hand, is being valued on the basis of its potential (much debated I will will admit) to actually make money per subscriber, which makes its valuation sort of analagous to retail prices vs. wholesale. On that basis, a markup that doubles the value is in line with what we see in a lot of businesses as you go from the manufacturers and distributors to those who can actually perform the alchemy of selling at a profit in the rough and tumble mass consumer market.

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