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: Zoltan! who wrote (2683)	4/5/1997 9:17:00 AM
From: Zoltan!	of 13594

TWO WRONGS MAKING A BIGGER WRONG - herring.com AOL's proposed purchase of CompuServe is greeted with a resounding shrug. By Luc Hatlestad If America Online buys CompuServe and no one's there to use them, will it make any difference? That's the question industry observers are asking in the wake of last week's rumors that AOL (Nasdaq: AOL) is weighing the purchase of its arch rival. The hearsay originated with the investment firm Wall Street Strategies, which issued a report stating that AOL officials are considering a deal that could be completed within the month. Although CompuServe (Nasdaq: CSRV) has all the characteristics of a good takeover target -- including a low stock price and a struggling business and subscriber base -- industry analysts said a marriage to AOL may amount to nothing. "All AOL would be doing is buying a failed company at a cheap price," said Fred Hickey, editor of the High-Tech Strategist, an industry newsletter. "I don't think that changes AOL's situation at all." That "situation," according to Mr. Hickey, is that AOL is mired in its own swamp of poor customer-support services and revenue losses brought on by its questionable flat-fee subscription plan. "AOL hasn't proven that their business and advertising model is workable," Mr. Hickey said. "They haven't made one red cent over the years." He added that AOL's problems may be secondary to the bigger question of whether the proprietary content of commercial service providers can compete with ISPs that allow subscribers to access the entire Internet. "Buying CompuServe might provide more user volume for AOL, but the real issue is whether commercial service providers are all that useful," he said. "Why do you need AOL when you can get the whole Internet for free?" In the wake of the rumors, CompuServe's stock price rose 11.5 percent to $11, while AOL's increased several points to nearly $46. CompuServe's stock was trading in the mid-30s as recently as one year ago. "CompuServe has been the first casualty of the rise of the Internet," Mr. Hickey said. "The question is whether AOL will be the next one." Regards

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