Disney, AT&T, Time Warner, Microsoft, et al. (oh, and AOL too)
Sorry to mention Disney disparagingly Duncan. They were just the first example that entered my head. The companies listed above are also among those who could find a reason to acquire AOL at a ridiculous valuation. Microsoft? Okay, so they have NO chance owing to anti-trust issues but think of the possibilities if they could. Unfortunately, all short sellers here need to be wary of stupid companies who could bail AOL out.
Now here are a few more investment considerations that apply to AOL, Netscape, Yahoo!, and some others. Most Internet companies are being valued based on their expected market positions 3-5 years down the road. So lets think about a few of the changes that could undermine today's leaders in the future:
1) Microsoft - both AOL and Netscape could be in over their heads. Microsoft is spending $1/2 billion per QUARTER on r&d. Think of the resources that they have to overtake Netscape in the browser biz and AOL in the online service sector. Do you think Bill Gates wants to be number two? And what happens to Yahoo! as Microsoft rolls out more advertising supported Web product?
2) Shift from inexperienced to experienced Web users. This is a biggie IMHO. In 4-5 years, most people will be experienced Web users. At that point, they will search MUCH less and get a lot of necessary data sent directly to their desktop. This will reduce time spent online in general interest areas (e.g. Yahoo & AOL). More importantly for AOL, experienced users have less of a need for AOL's exclusive content and user-friendly interface. With a mind blowing amount of info available to all on the Web, access becomes even more of a commodity than it is today. So who knows where that will put AOL.
3) AOL chat rooms are the hot commodity today. But this could be akin to the restaurant or bar scene. Who is to say that AOL will still be the place to go in 3-4 years? It could be but I wouldn't bank on it.
4) The proliferation of home pages. How many people will leave AOL because they will create their own home page w/ a different web address? I certainly wouldn't house my home page on AOL's slow servers and would want my email tied to my home page location. Wouldn't you?
The only thing that I can't decide is which company is more grossly over-valued - AOL or Yahoo!. I tend to think the latter. |
