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Technology Stocks : America On-Line: will it survive ...?
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To: Saban Kurucay who wrote (11346)10/2/1998 8:37:00 AM
From: Jules B. Garfunkel  Read Replies (1) of 13594
 
Hello Sabin,
Your, "The remaining 220 millions will reduce future earnings. If you assume these charges will be spread over 20 quarters or so, that would make about 10 million reduction in earnings for each quarter."

However, your figures do not include the additional revenues that AOL may generate from the two acquisitions. While this will be minimal in the early years. since neither company was generating a profit, non the less there will probably be some new revenues.

Perhaps of more significance, is my estimated $.06 per share per year reduction of AOL's earnings, which will occur over the next 5 years. This $ 06 reduction results from the SEC's adverse ruling, (see below) announced Monday, restricting AOL from taking the full amount of their originally planned write-off for the acquisition of Marabilis Ltd. and NetChannel Inc. In view of this ruling by the SEC, affecting AOL's accounting treatment of R & D expenses for the two companies acquired in 1998, it is hard for me to believe why analysts did not lowertheir AOL earnings estimates for the next five years.

Do the analysts have a hidden agenda? I continue to be short AOL, but will the brokers recommending AOL also disclose their position and self interest in AOL?

"The fourth quarter and fiscal 1998 net income results
reported differ from the operating results issued Aug. 4
because of the inclusion of several charges against earnings.
Those include: $60.5 million for the write off of acquired
research and development in connection with the purchase of
Mirabilis Ltd. assets; $10 million for the write off of
acquired research and development in connection with the
purchase of NetChannel Inc."
Jules
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