September 28, 8:22 pm Eastern Time
AOL stock surges over 9 percent as optimism grows
By Barbara Etzel
NEW YORK, Sept 28 (Reuters) - The stock of America Online Inc. (NYSE:AOL - news), the world's No. 1 online services provider, climbed more than 9 percent on Tuesday amid growing optimism that has sent it above the $100 mark for the first time since mid-summer, when competitive threats began to weigh on it. AOL stock gained 9-1/8 to 109-7/8 on the New York Stock Exchange, where it was the most actively traded issue.
A spokesman for AOL, based in Dulles, Va., declined to comment on the stock's price move.
Several analysts have noted in recent days that selling pressure has lifted since the threat that rival Microsoft Corp. (NasdaqNM:MSFT - news) might attack AOL's subscriber revenues -- by introducing lower cost or no-cost services -- seemed to evaporate after Microsoft laid out its Internet strategy last week.
Instead of cutting prices, Microsoft said it planned to boost its monthly service charge for full-service Internet access to $21.95, matching the premium rate America Online charges for its 18-million-member flagship AOL service.
On Tuesday, BancBoston Robertson Stephens reiterated its ''strong buy'' rating for AOL's stock. Internet analysts Michael Graham and Keith Benjamin said in a statement that four different concerns have weighed down the stock -- and that three of those have appeared to have lifted in recent days.
''These are market share and subscriber growth, international competition, pricing and free services issues, and broadband access development,'' Graham and Benjamin said. ''It appears we have seen some resolution of the first three issues over the past few days.''
They were referring to challenges from rival Internet access providers, both in the United States, Europe and Asia, as well as to the seasonally slower growth in membership over the summer and the perception that AOL needs to strike more partnerships with providers of high-speed Internet services.
The analysts said that as AOL continues to address these issues and head into the expected peak online shopping season, ''there is significant upside potential for the stock.''
Analysts said the surge in the stock price Tuesday also may have been triggered by trading programs. AOL, a blue-chip Internet stock, is traded by many institutions on a technical basis.
On Tuesday, the stock broke above the $100-a-share level for the first time since June 26, shortly after its fiscal fourth-quarter earnings report. It has traded in a range of mostly $80 to $100 since May, limited to a high of about $130 and dipping as low as the mid-$70s.
Other positive developments, analysts said, have included AOL's expansion internationally by launching a new AOL Hong Kong service in China Tuesday and plans to introduce a more aggressive pricing scheme for its AOL UK subscriber service.
In addition, America Online said it planned next week to unveil AOL 5.0, the latest version of the software used by members of its flagship service.
New features of AOL 5.0 include improved Internet search functions, a new on-line scheduling system and ''You've Got Pictures,'' its partnership with Eastman Kodak Co.(NYSE:EK - news) to make sharing photos via e-mail easier.
The introduction of the new software will be heralded with the company's annual fall advertising and marketing push designed to draw a wider audience during the peak period of Internet usage that tends to occur in the fall and winter.
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