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Technology Stocks : America On-Line: will it survive ...?
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To: Vic Glassley who wrote (12425)12/11/1998 12:26:00 PM
From: Mark Brophy  Read Replies (2) of 13594
 
The future might not be so bright.

AOL has 15m customers, but there are 600m people in North America and Europe, so they've only reached a small minority. They'll probably get 20m or 30m customers before the growth stalls, but I think we can be sure that growth will stall because the net isn't a very good experience with 28.8K modems.

There seems to be a lot of wishful thinking on this thread about the potential of AOL to make deals with the cable companies. They're over their heads in debt and have turned to Paul Allen, Microsoft, and AT&T to finance their future ventures. AOL only has $1.25b cash, so they can't finance the purchase of even a small cable company. Even if AOL exceeds current earnings projects substantially, they still won't have the $4b cash that Paul Allen paid for a small cable company.

AOL could also solve their bandwidth problem by hooking up with phone companies and using ADSL. I expect it to happen because the AT&T-TCI combination will be such a juggernaut that the local Bells and AOL will be forced into each other's arms. But, those companies are used to big profits and don't operate with the loss carry-forwards that constitute one of AOL's main assets (even after 15 years in business!). My monopoly, U.S. West, charges $40/month for ADSL in addition to the charges from my ISP. I've passed on the deal because it's not worth $60/month for me with the content available on the net today.
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