I've been reading this thread for quite a while now, and I just thought I'd add a few comments from my perspective. I should say that at the moment, I'm long quite a few shares of AOL. I'm long the shares because of the recent technical action of the stock and because of the huge short position in the stock providing for the possibility of a big short squeeze run-up in the price on any good news, whether it be hype or otherwise. I should also say that I was keenly observing the technical action of the stock because I was short a few hundred shares (this tends to sharpen the senses, I'm sure you'll all agree). When it became obvious that the stock wasn't going to tank any time soon, I covered and went long.
I have to say that I agree with most of the negative arguments regarding AOL put forth in this thread (with the exception, perhaps, of 1., the huge conspiracy/book cooking theory put forth from time to time [I'm not saying that they aren't cooking the books, but with $100 million worth of the stock trading on a daily basis, the people spending that money know how to read a balance sheet and make their own judgements on its merits], and 2., the idea that the shorts are brilliant and all cover before each run-up [they all couldn't have; with over twenty million shares short, there wasn't enough volume for all the shorts to cover, even if they were the only buyers]). But overall, there is a good negative case on AOL (otherwise, there wouldn't likely be twenty million shares short).
After this long-winded introduction, I'd like to add some observations based on what I see in my daily work. I have a small business that I started a year and a half ago. I upgrade PCs, troubleshoot PC problems, and perform services like hooking people up to the internet, and I go to people's homes to do this. What I see in my daily travels: 1. Most people that are online have AOL. 2. Most people would rather stay with AOL than switch to an ISP. Why? a.) The kids prefer AOL for easy chat with their friends, b.} the adults themselves prefer AOL chat (not many in this category), c.) inertia - easier to stay with AOL than switch, d.) (this is an important one and should not be overlooked) easier to install and use AOL than the internet. This last point is important here, because we are all advanced users; we see easily and clearly the benefits of the internet and the drawbacks of AOL, but for many, if not most of my customers (the general public with computers, and I see lots of them every day), what is good for us is overwhelming and confusing for them. And the day when the switch to the internet reaches critical mass is not imminent. The average person is not ready for it.
What this tells me is that the subscriber base is not going to erode quickly. Combine this with improving advertising revenues (I'm not going to debate the legitimacy or future projections on these numbers, but you can smell those reported numbers increasing the next couple quarters) and all those shorts (some of them must be a little nervous), and it looks like a continued rise in the stock price. I remember watching it in disbelief the last couple years before it broke last year. It could certainly happen again. In any case, I'll be staying cautiously long until I see this trend change. Without any bad surprises (and it seems that the management has taken great pains to avoid any bad surprises) it could be a few more quarters before a significant change in the trend.
Regards,
Tom Friend |
