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Technology Stocks : America On-Line: will it survive ...?
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To: steve lipson who wrote (182)9/26/1996 9:51:00 PM
From: Johnathan R. Bowden   of 13594
 
Steve, while I agree that AOL will survive, I do not think it can support its high multiple.

I just received in the mail advertising for it's new value plan service, 20 hrs for 19.95 (I used to use AOL). This will help reduce its churn rate, but at the same time cut into its revenue. Figure 20 hours the old way was $54.20, now it's 19.95... This might hurt earnings... Mark The Trader has some excellent postings on its aggressive accounting which is hidding the fact that currently it is really LOSING money.

I don't own stock in any ISP's either, I think they are a poor investment- you are absolutely right about the competitive pressures they face and their thin margins.

But as the ISP's become as easy to use as AOL... And AOL acts more like an ISP, then either margins will rise or fall... If my memory of history serves me right, margins will fall, especially when the RBOCs jump in. Margins are always high in any new industry, but as the business matures, margins fall and competition increases.

regards, John
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