Madafas, Blodgett didn't say AOL may not beat estimates, he said AOL may not beat estimates by as wide a margin as it had in the past. There's a big difference here.
14:26 DJS Analyst Says AOL On Track To Meet Or Beat Earnings Forecast
14:26 DJS Analyst Says AOL On Track To Meet Or Beat Earnings Forecast
NEW YORK -(Dow Jones)- America Online Inc. is on track to meet or beat
Wall Street earnings expectations for its fiscal fourth quarter, but the
company's historical pattern of beating analysts' estimates by a wide margin
may change because of pricing pressures, Merrill Lynch analyst Henry Blodget
suggested Friday.
Blodget expects AOL to report earnings of 32 cents a share for the year
ending June 30, one cent less than the mean estimate of analysts surveyed by
First Call. Blodget didn't include a fourth-quarter estimate in his note, but
First Call reports a mean analysts' estimate of 11 cents a share.
For the year-ago fourth quarter, AOL posted earnings of $57.3 million,
or 6 cents a split-adjusted share, excluding items, on revenue of $792.3
million. For the year ended June 30, 1998, the company earned $134 million, or
14 cents a split-adjusted share, excluding items, on revenue of $2.6 billion.
Blodget said he is concerned about the top Internet-access provider's
ability to continue to beat analysts' expectations by a wide margin. He cited
the proliferation of alternative Internet-access models, including free access
in Europe and the U.S., and the bundling of Web access with related products
in the U.S.
Dulles, Va.-based AOL will probably make strategic moves in response to
these changes in the competitive landscape, Blodget said. He noted reports
that AOL is in talks with Microworkz Computer Corp. to begin producing
AOL-branded Internet-access devices. These devices would either be sold at
nominal prices or given away free in exchange for customers' subscribing to
AOL, according to published reports.
AOL officials weren't immediately available for comment.
Some observers have said that low-cost and free services will put
pressure on AOL to lower its prices. Blodget said in an interview with Dow
Jones that investors should keep in mind a key question: Will AOL beat
earnings estimates in the future by as wide a margin as in the past? This
question is based on the possibility that AOL would consider "alternate
pricing models (that) might address a segment of the market in which pricing
decreases are offset by higher volume," he said. The analyst said he has
reached no conclusions about this question.
Blodget appeared to endorse AOL's announcement earlier that it bought
warrants to purchase an additional 15% stake in China.com Corp. on top of its
current 10% stake. Blodget likened China.com to a local, Asian version of
Yahoo! Inc.'s Web portal.
Blodget reiterated his "buy" rating for AOL stock. In afternoon trading
Friday, the stock (AOL) was down 18.7 cents at $106.563.
By Peter Loftus: 201-938-5267
Copyright (c) 1999 Dow Jones & Company, Inc.
All Rights Reserved.
06/25 2:26p CDT
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