Larry, the technology that AOL is basing its future on is hardly visible to the average Joe in this day and age. While most people are on pokey dialup modems, its hard to envision what or where AOL will be doing. I'm not going to argue valuations, but I would like for you to contemplate the potential of having xDSL or cable type bandwidth on a service like AOL's.
What would that mean? Well, not only will AOL become the primary portal for evening entertainment (video, audio, etc on demand), but you can speculate (and i stress this word, since no one truly knows what the future holds), that AOL with its *** million subscribers will happily provide that content for a fee. YHOO's approach is extremely intelligent (being agnostic towards access) and YHOO too will perhaps be #2, right behind AOL. These are your media companies. We cannot justify market caps or valuations for these, just as we could never justify MSFT in the past. Granted, MSFT never got that nutty, but i seriously doubt you will see significant downside from either AOL or YHOO from here (I respectfully disagree w/ the 50% cut from these levels as some have alleged). Markets trade on emotion and that is what partially (note there are other obvious factors) drives a stock's price.
You did make an important statement in that these stocks will not recover to their old highs for a while, but 2-3 years is way too long and that may be the case for your generic dot coms. Market leaders such as YHOO and AOL can forseeably be very important distributors not only of content but software in the future as well (among other transactions). If one could simply pay to 'rent' or submit a yearly fee to use the latest office software suite (like office 2000) or gaming software (pick your flavor of Quake 4 or 5 or whatever), I believe most computer users would prefer doing that. MSFT is a great company, but the thing it perhaps fears the most is an online OS whereby a "new media" company like YHOO or AOL makes its OS seem archaeic. It won't be simple entertainment that the bandwidth needs of AOL or YHOO's future software and services will rely on. The sole purpose of a computer used to be for word processing or more mundane features used in offices and business settings. As we have moved into the online potential, we have to give some room and thought to the possibilities of what we can and cannot do online. I truly believe there will be much more (not just what I illustrated above). Best of luck.
Regards,
SH |
