Thom, I have asked this question before but no one seems to have the answer, so I am trying again here.
Anyone knows what type of credit facilities AOL has in place to finance operations for the next few months?
On the revenue side, the current quarter has to be a nightmare. Number of subscribers, if not decreasing, is certainly not increasing at historical pace anymore. How many subcribers took advantage of the one year in advance plan in December? It appears that all those advance payments were lumped into last quarter's revenue. For each member who paid in advance, AOL will receive zero for the next three quarters. How many new subscribers this quarter are paying one yr in advance? Advertising and other revenue could not possibly be increasing fast enough to offset the loss in subscriber revenue.
On the cost side, 50,000 modems, $350M of improvements, AG refunds are all well documented. True, they may be cutting down a little on marketing cost but by how much? Instead of running ads for new customers, they are now running "please be patient with us ads" which I assume cost the same. They are targeted to keep subscribers from defecting. G&A expenses are unlikely to decrease. Another big charge off will reduce share holders' equity to zero, from the measely $38 million last quarter.
In the immediate future, AOL has to raise money. How? Corporate bonds, more shares, commercial loans? Not sure if any of them are feasible but will all be negative.
The only positive that could happen is if someone out there thinks the 8 million subscriber base is worth a takeover. This is highly unlikely.
Not that anyone cares but the more I research AOL, the more I am inclined to switching from "play money" puts to "serious money" puts. July 30s are probably the most interesting at this time.
Comments?
Ramsey |
