Hi JAM,
I agree with all your negatives. :-D
As for the positives:
1. Large and increasing subsriber base.
Yes, its large and appears to be increasing though we're getting signals from management that this is slowing. I'd really like to see an audit of the subscribers, how many are actually paying and not getting freebies when threatening to quit, how many are actually active month to month, and the average time spent at AOL as opposed to surfing the Internet when logged on.
2. AOL as the premier player in its role as an ISP.
Well, they're the largest ISP, for now. Last week's customer satisfaction survey really calls into question the "premier" adjective. Though I don't know as this matters in any event, as they appear to be selling the ISP function to Worldcom. They'll still be taking in the $ but passing it to Worldcom for services rendered under some sort of long term service agreement. With the coming popularization of higher bandwidth Internet access, one has to wonder how long this agreement will be sustainable, and whether to AOL's advantage.
3. Increasing ad revenues.
For the last quarter, quarter to quarter, this is not true. Ad and e-commerce revenues combined actually decreased 15% over the previous quarter. The year to year comparison was good. However, since this is supposed to be AOL's "emerging" revenue source, and a currently small source at that, the drop quarter to quarter does not bode all that well.
4. Increasing revenues as subsriber base grows.
Well, one would hope so, though not generating earnings growth in the areas they are targeting. See #3.
5. The opportunity for further growth as network computers gain acceptance in the marketplace.
Not sure what you have in mind here. Network computers are currently mostly a cost-conscious business market, not a consumer market. Actually, the cost of the fully-loaded PC is approaching that of the NC. For consumers, what's the point? Businesses are mostly interested in the NC due to lower support costs, mostly because their users can't screw up the installed, company-specific software configuration and harkens back to the older, host-centric computing model. AOL's strength is not at all in this area. If you're thinking WebTV, AOL's not involved there, either. I think when one signs up with WebTV, only WebTV can act as ISP.
6. Internet sector as momentum leader in the market.
Yeah, the Internet sector is pretty strong right now, though pricey as hell. I suppose its because the reasoning is something like, "what's really hot but not likely to be affected by Asia's problems?" Well, on the surface, the Internet sector fits the bill. However, the Internet's prospects are based on expectations of increasing advertising revenues and/or increasing e-commerce. These expectations are already more than priced in for the sector. If the USA succumbs to a cyclical downturn and the general business climate turns contractionary or even fairly cautious (and it can happen), ad revenues will dry up, e-commerce will slow, and business plans will be put on hold. That would kill this sector's growth projections. If that doesn't happen, the unbridled competition to sell (or give away!) ad space, product, and services will eventually drive margins razor-thin anyway. When everyone wants to sell ad space, books, computers, stock commissions, etc. on-line, there will be a race to the bottom in pricing.
Quite negative, yes? :-D |
