I'd guess that AT&T offered about 500 million shares worth of stock (theoretically worth over $30 billion), but AOL was smart to reject AT&T's offer. AT&T shares are tremendously overpriced, IMO - and their CEO Armstrong knows it, that's why he's out to buy what he can with AT&T shares while they are still high. I still like AOL long term, and the rumored offer from AT&T is somewhat flattering. The only thing is, I'm not sure AT&T's offer, reputed to be "comfortably above" $19 billion really validates the market cap of AOL - because the currency they would be using (AT&T shares) is so overpriced. I feel an offer from a more soundly valued company (such as GE, or IBM) would go further to validate AOL's market value than one from AT&T.
AT&T's assets aren't significantly greater than Sprint's, yet AT&T's market cap is more than 3 times Sprint's market cap. The difference of course is "brand name", i.e. AT&T has more customers - but not because of a better or cheaper service, simply a lack of knowledge by the public that telecom is a commodity - eventually AT&T's "brand value" will fade, with the advent of a more sophisticated public.
AT&T's market value cannot stand the test of time - unless they expand their assets. AOL on the other hand should increase in market value over time, IMO - in fact, if both AT&T and AOL were to remain essentially intact, I would guess that eventually (5-10 years hence?) AOL will have a greater market value than AT&T, even though currently AT&T's market cap is 4-5 times AOL's. Thus the buyout attempt by AT&T was smart on their part, and the rejection of this on the part of AOL was also wise. Personally, I'd like to see AOL remain independent - the shares should be able to go a lot higher on their own than with a buyout of the AT&T variety. |
