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Technology Stocks : America On-Line (AOL)

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To: spal who wrote (37606)	1/13/2000 11:27:00 PM
From: Joe S Pack	Read Replies (2) of 41369

Spal, Here are my thoughts on integration and other practical issues: 1) Technical: TWX cover about 23M cable lines. Their Road Runner (RR) is getting updated but have to see how it will start handling traffic surge due to AOL bringing in millions of customers. Note: VP of Technology at AOL (Mario Vecchi) is the person who put Time-Warners RR from scratch and then joined AOL last year. So he knows what TWX has and its architecture top to bottom. So on the technology side it should be a plus. In fact one of the recent presentation he kept on insisting about scalability of AOL and reliability. Believe me, his background is from a telephone R&D lab and he knows what is meant by reliable systems and service. So going forward should not be as difficult as one would like to think. 2: Coverage side: How will they address rest fo the US, where they don't have cable plants? I think they will have two choices: 1) Continue their good relationships with RBOCs (Bell Atlantic, SBC, Ameritech) so that they provide DSL based broadband services in areas where they cannot have their own cable. They also have invested 1.5B dollars with Hugh' Electronics to provide dish based DirectTv. They are also buying a minority position in PALM computing (The dominant leader in hand held PDAs, where mighty Microsoft has been miserabily failing for the past two years) which will be IPOed next month. These will provide opportunity to attack uncovered ares through satellite and wireless devices. 2) MediaOne owns 25% of RR and ATT is in the process of acquiring MediaOne. A few months back Time-warner and ATT announced an agreement whereby Time-Warner will sell ATT's telecom services over their systems. After this merger AOL won't like to carry ATT's service to its customers and may try to do its own services. As a give-and-take they may still allow ATT to sell their services provided ATT opens its cable plants for AOL to sell its BB content. If this happens AOL will be truely "ANY where". 3. Management: I think this may be bigger issue as two cultures need to take this opportunity to work together rather than outsmart each other. I think Case and Pittman are practical guys and hence they gave CEO to Mr. Levine while retaining 3 out of 6 board members from AOL guys (Case - Chairman, Pittman - COO of the combined company, CFO of AOL, who will control the purse). I think in the long run Case may remain Chairman and Pittman may become CEO. So IMHO they will make sure that things won't get out of hand. 4. Integration operations: They need to consolidate their IT infrastructure. It is not clear what kind of systems both companies have (SAP or a collection of business applications from multiple vendors running one several different plateforms etc.). Consolidation of billing and financial. This will involve some hard work and may take time. 5. International markets: I think they have a better shot here and they have several well established name brands and assets. In summary it may take some time but they will eventually make it and become a giant. -Nat

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