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Technology Stocks : America On-Line (AOL)

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To: THE PHANTOM who wrote (33718)	11/5/1999 3:45:00 AM
From: puborectalis	Read Replies (1) of 41369

RERUMOR........ AOL and AtHome Back At The Table Kevin Prigel Nov 5 1999 America Online NYSE:AOL Internet \| Technology \| Quote \| News \| Research AT&T NYSE:T Communications \| Quote \| News \| Research Excite AtHome NASDAQ:ATHM Communications \| Internet \| Quote \| News \| Research Do you want early access to the best StreetAdvisor.com has to offer? Subscribe to our newsletter. A source has contacted me with the following information. This source did provide the rumor that MSFT and ATHM were in talks to me before the rest of the media broke the story. This may have been complete rumor, but it did get the stocks moving. I have no reason to trust this source, or to disbelieve this source. I will continue searching for more information to confirm the information he gave. Read the info for yourself: "I wanted to share with you some information I thought you might find very interesting. I am hoping with your sources you can confirm this rumor because it is huge. "I have heard through a very trusted source that AOL is going to buy ATHM for a cash and stock swap deal and will announce this within the next week. The rumors of the past were true that they have been in talks for some time and have broken off discussions several times. It seems that there is some very bad blood between Steve Case and Jermoluk. The primary reason for the bad feelings is that AOL has been launced a campaign to smear ATHM and help suppress the stock price through the Open Access coalition. At the same time AOL has been very effectively promoting their stock making a stock swap deal very favorable for AOL, This has not gone unoticed by Jermoluk. In fact it was AT&T that stepped in and brought these two powerheads to the table through a firm based in CA that negotiates complex deals between individuals that have "personality conflicts". "The deal that I have heard that has been approved in broad strokes and the finer details are being hammered out. AOL is to make ATHM a wholly owned subsidiary of AOL keeping all present management team of ATHM intact. The officers of ATHM will be given very attractive AOL stock options as incentives. The talk is that it will be about a 1:1 stock swap deal after the AOL split. Steve Case was concerned that this would put downward pressure on AOL stock since ATHM is trading in the upper 30 range. (BTW Steve Case he has filed to sell shares). His officers and advisors think that the broadband stratagy in place will enhance the company value and reflect in the stock price in a positive way regaurdless of the current price. Time will tell. What people don't realize is that AOL will not be able to aid much in the rollout of broadband much more quickly than is currently being done by AT&T and @Home. Once the infrastructure is in place however, the growth for cable access will skyrocket. "AT&T has much bigger plans for cable than most people realize. They will provide many telecommunication services through the pipe and derive revenue from those services. Revenue stream was another major sticking point during discussions. The @Home revenue model was not accepted by AOL at first. Jermoluk insisted that their advertising revenue contribution was underscored by AOL's model. With broadband Jermoluk contends that there are more clicks ond follow through on advertising and banners than narrowband generating more effective advertisement on their broadband sites. The solution is a complex formula that monitors increase activity on AOL based sites as well as the sites rolled into AOL from Excite and now Blue Mountain. If indeed advertising revenue can increase due to broadband access, AT&T will garner an increasing percentage of the advertising revenue up until the year 2006 when it will be capped. AT&T will get about $8.00/subscriber/month based on broadband access plus Revenue from advertising. (Thought to be low by most of the analysis.) This is a big gamble for AT&T but they have their eyes on a much bigger picture. "The Open access issue will slowly die away. AOL never believed it would be a successful campaign but achieved their target by suppressing ATHM stock making any deal more attractive to AOL. Even if this plays out that open access is forced AOL feels like they win in the end because no other ISP can effectively compete with them in terms of subscriber base and content. Very arrogant stance on AOL's part. "Interesting that the deals in place with Liberty One (was about to merge with China.com) were suspended until this AOL ATHM merger takes place. Jermoluk was worried (for good reason) that the CEO Warren Lee could not keep the lid on the AOL ATHM deal if he got wind of it. This is ironic because the leak that I have heard comes from the ATHM side. "One last note about these Rumors about the AOL and ATHM deal. I believe this leak was intentional to get ATHM's stock price moving to make the AOL/ATHM deal palatable to AOL shareholders. As far as I know only a handful of people know about this deal but I thought you would be able to uncover some truth with your own sources." Kevin Prigel serves as President and CEO of StreetAdvisor.com. He actively invests in individual stocks. If, at the time of writing, he owns any stocks mentioned, they will be disclosed here.

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