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Technology Stocks : America On-Line: will it survive ...?
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To: Yikes who wrote (5086)10/16/1997 1:46:00 PM
From: Brent D. Beal   of 13594
 
"AOL is not adaptive to new technologies, and its business model is unclear and questionable at best. That's why it doesn't deserve sky high multiples"

What I find particularly disturbing about this stock is that it currently trades on its subscriber count (the more subscribers the more people are willing to pay for it, regardless of earnings) and this number is perhaps the most susceptible to manipulation by AOL. Fudging earnings tends to be somewhat transparent and difficult to sustain over multiple periods--AOL's subscriber counts, however, are a different story. It is a well know fact that AOL currently cannot handle more than 500,000 online participants at a time, so how many active onliners provide their eyeballs to augment AOL's advertising revenue on a given night--who knows? but I bet the number is a lot smaller than 11 million. This is like letting a company manufacture earning numbers without any oversight and demands to look inside the black accounting box. If I were evaluating AOL and I decided that the most relevant statistic was the number of subscribers, I'd been sure I know how they derived the number and that it was accurate. This is something, apparently, that analysts don't feel they need to address. They seem perfectly content to swallow whatever number AOL puts out without so much as asking any hard questions.
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