>CFO says they will go cash flow positive in the March quarter.
A 5 month-out forecast (made 11/08) from a company that couldn't
even forecast a month out for demand associated with new rate for
its basic service.
>This without considering the effects of member prepayments.
Are you sure? Did he specify?
>Early results on member upgrade from $9.95 + hourly charges to
>$19.95 flat rate are encouraging. Estimates from Alex Brown say
>75-80% of existing subscribers have opted for flat rate already.
>Prior average monthly subscriber service fees were around $16.85,
>so 25% at $9.95 + 75% at $19.95 = $17.45. No too bad!
You quote as fact ("early results") * not AOL reports *, but `estimates' from the analyst at AOL's investment banker, who has been the most shameless bull on AOL -- even all the way from 70 down to 25. (He also tried to talk 3DO up, another AxB IPO, all the way down). Because 70% of AOL subs didn't use more than the 5 hours in the $9.95 plan, it's hard to see how 75% would convert knowingly, willingly, or permanently to $19.95. Also, the $16.85 was down from $17.43 the prior quarter and $18.72 before that.
>Alex Brown went on to estimate that if 3-4% adoption of prepayment >occurs,it will lead to a one time bump in cash flow of near $100
>million(yes, this does rob from tomorrow's cash flow).
EBITDA, but NOT Free Cash Flow (which is what matters), and of course,
not earnings. The prepay must be amortized over the subscription period.
Anyway, the persistent focus on one-time stuff--either to ignore as with write-downs/offs, or to tout as with the above, has been one of the bulls worst tactics. Investors are seeking some predictability, not a gambler's roller coaster.
Also, in 12/26 WSJ: PSINet Expects Its First Positive Cash Flow in 1997
Wm Schrader CEO:
"How can AOL or AT&T make money when they're giving (access)
away?" asked Mr. Schrader. He said that it used to cost the
company $22 a month a subscriber -- $2 more a month than it
received from each subscriber.
>They all like the "Buddies" feature that lets you know when one of
>your circle is on, so you can conduct private chat. AOL telephony
>is coming next to add to that experience.
Just where advertising, upon which AOL has staked its future profit, isn't. (And as Prodigy learned in spades, can't be without huge user revolt)
>What are the reasons for the vitriol underlying so many posts about
>AOL? Not just here. ISP users and Net fans seem to really pour on
>the animus toward this company.
Arrogance towards customers, the media, everyone. AOL persistently
exudes attitude that it can finessee everyone and everything. Even in
face of obvious blunders it can't display humility bare of bluster.
Worst of all, it appears to believe its own bs. |
