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Technology Stocks : America On-Line: will it survive ...?
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To: Todd Daniels who wrote (5115)10/21/1997 4:23:00 PM
From: steve lipson  Read Replies (1) of 13594
 
Todd

You may be underestimating the potential that resides in existing PC households where the upgrade purchase is motivated in part by desire to replace an old machine with one robust enough to take advantage of the online offerings. Thus AOL growth due to pure PC newbies may slow, but the more mature and practical offerings online may bring in a second wave of growth from previous PC non-net homes.

Haven't done the math to see what it would look like, but the cellular industry (slower growth curve than online access but much better pricing and profitability) used Pop valuations that looked at all the potential customers in a coverage area without even worrying about actually signing them up for service. (Even AOL's accountants wouldn't dream of being that aggressive.) I can't say that cellular investors were too badly treated by using such a measure that can capture the growth potential and not just rely on the cash flow-based valuation measure that was common in looking at the cable business.
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