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Technology Stocks : America On-Line: will it survive ...?
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To: Jason Cogan who wrote (11540)10/26/1998 2:18:00 PM
From: Steve Robinett   of 13594
 
Jason,
You say AOL amortizes software development costs as "investment" rather than expenditures.

Of course you're right. AOL is a master of juggling two flaming torches and a set of books. The SEC has slowed them down and regularized some of their bookkeeping--I expect this quarter's earnings tomorrow to be a bit clearer--but they still do capitalize items that rigorous accounting practice might expense and even occasionally vise versa.
You're also right that using discounted cashflow (my favorite valuation method) to value AOL presents a scary picture, but AOL is so far ahead of a rational valuation that as long as it has the appearance of earnings and growing revenues, those on Wall Street who build castles in the sky with keep building.
Best,
--Steve
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