Do you think AOL is less riskier than ATHM?
No, but the market thinks it is. The big money managers are looking at AOL like its
a blue chip....yikes. These are the same people who derided it years earlier and are
now deriding ATHM. Analysts will be recommending AOL long after it is a decent
investment.
Exactly. When everyone in the street knows ATHM is a great investment, it's too late to buy ATHM.
Risk of ATHM:
1) Open Access. Actual open access will not be a reality for another 3-4 years. Pricing disadvantage alone probably can drive AOL out of cable, let alone technical problems. And Congress and FCC are not in the mood to interfere. Open Access issue only serves to scare off the less informed investors. For me, I can safely write it off for now.
2) DSL inroads. Cable so far is the best and less expensive medium.
The technical problem facing cable is less daunting than that facing ADSL. And RBOCs are still so far less aggressive in rolling out. So I predict the gap between cable and ADSL will widen. However, I regard DSL as a more significant threat to the business of ATHM, but I don't think this is a threat that ATHM will not overcome.
3) Sub numbers: With the active upgrades from all of ATHM's 21 partners, and with the aggressive marketing ATHM is undergoing, the sub number growth will be healthy. It's easy to conceive 10 million users by 2002. Considering AT&T's bundling strategy unfolding in the next few years, @Home will be an easy sale when customers can get a single and cheap bill. Barring major fallout of @Home's network, ATHM should enjoy a very healthy growth.
4) Satellite, it will remain a less attractive medium despite AOL's 1.5B investment.
5) AT&T abandoning @Home, not likely because T wants to control the first page customers see. That means T is not satified in only the
transport business. T will not partner with AOL and lose autonomy. Unless T can buy AOL. But AOL has gotten too expensive to buy. By working with ATHM, T has controlling power.
6) AT&T buying @Home, this is not good for us investors. I view this as a risk.
So balancing all the risks ATHM faces, I feel the reward of ATHM will far surpass the risks. That's why I am long. |
