Bill Wexler's Dog Pound Message Board

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Non-Tech : Bill Wexler's Dog Pound

REFR 1.847

-1.2%

Nov 14 9:30 AM EST

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To: Bill Wexler who wrote (5956)	1/12/2000 11:40:00 AM
From: Graeme Smith	Read Replies (1) of 10293

Bill, re: AOL & Time Warner My feeling of the merger is that it will create a phenomenal company, Time Warner gives AOL every media outlet it doesn't have, plus access to cable (mostly good but could make it more difficult to force AT&T to open up its lines), and extremely good cross promotional opportunies. I have only one fear, a big fear and so far one that doesn't seem to mentioned except in passing. Because AOL use purchase accounting they are going to have to take a charge to earnings of 150B amortised over the next 20 years. Thats $20B or $2 per share in earnings every year for the next 20. ie. They will probably never be profitable. This seems like a strange situation. On one hand, if they execute well their cash flow should be incomparable. Yet no matter how good this cash flow is they will be reporting negative earnings, even as they grow to be one of the worlds most profitable companies. I don't no how Wall Street will react, and I think this may be the reason for AOL's drop in the last few days. However I'm very surprised that it is not mentioned at all in any news wire I've seen. Am I missing something? Graeme

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