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Technology Stocks : America On-Line (AOL)
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To: ChinuSFO who wrote (31085)9/19/1999 2:57:00 PM
From: Brian K Crawford  Read Replies (1) of 41369
 
Biz Week article on the ISP business:

"Mindspring: In the Squeeze"

...has a chart that shows the one year change in subs at
various ISP's

Members Today Members Mid '98
ISP Millions Millions
------------- -------- --------
AOL 19.6 13.9
MSN 1.8 1.8
AT&T/WorldNet 1.5 1.1
Earthlink 1.4 .7
Mindspring 1.2 .4
Prodigy 1.1 .8

Article notes that the ISP price wars are going to squeeze
profits for the second tier ISP's. Their falling stock
prices (down 40-60% since the April peak) are reducing
their chances to grow via acquisition. Much of
Mindspring's growth came from acquiring smaller ISP's...
...about 40 of them.

Article concludes the likely outcome: second tier ISP's
only hope is buyouts from the deep pockets players like
AT&T.

My sidenote observations:

1. The AOL growth is remarkable in a year where they raised
prices.

2. We are about to find out this year if a premium brand
(AOL) coupled with a fighting price brand (Compuserve)
is a potent enough combination to permit AOL to not only
keep their existing market share, but continue to grow.

It will be a slugfest and fun to watch...:-)

Another tidbit that tickled my imagination:

I read (elsewhere) that if (when?) AOL drops Microsoft's
Internet Explorer as its standard browser and offers
instead the Netscape Navigator, Netscape's share of the
browser market will jump from less than 45% to over 65%.

This got me started thinking about AOL's power to influence
the future platforms for instant messaging, browsers,
etc...I mean, don't forget we are talking about 20 million
AOL users + 20 million web AOL Instant Messenger users + 40
million ICQ users + whatever the international market ISP
initiatives produce.

I think this built-in user base power is the true kicker
and upward surprise factor that is not in the price of
the AOL stock.

There is no doubt in my mind that Steve Case will not blink
in a price war. AOL will take the price where they need to
to continue their overall ISP dominance. I believe this may
partly explain why Microsoft is getting a kind of
desperate, hysterical tone about all their web and
instant messaging initiatives.

This is better than watching soap operas.

Brian
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