Top Financial News
Tue, 30 Mar 1999, 7:30pm EST
America Online Shares Rise on Optimism for Internet Commerce, New
Products
AOL Rises Amid Optimism for E-Commerce, New Products (Update6)
(Updates shares in 2nd paragraph.)
Dulles, Virginia, March 30 (Bloomberg) -- America Online
Inc., the No. 1 online service, rose 9.2 percent to a record on
optimism for increased sales on its Web sites and new software
for electronic commerce developed with Sun Microsystems Inc.
AOL rose 12 1/8 to 144 1/2 in trading of 32 million, making
it the second-most active stock in U.S. markets. Earlier, the
shares touched an all-time high of 149. The stock has more than
doubled since late January.
Through its 17 million subscribers and network of Web sites,
AOL now reaches more than half of the 30 million U.S. households
with online access, said PaineWebber Inc. analyst Jim Preissler.
Preissler raised his 12-month forecast for AOL shares to $215
from $125. The company gained Web sites and a line of corporate
software for e-commerce when it acquired Internet software maker
Netscape Communications Corp. two weeks ago for $10.2 billion.
''People now recognize what this e-commerce will do to AOL's
business,'' said Ulric Weil, an analyst at Friedman, Billings,
Ramsey, who rates the stock ''buy.'' A boost in transactions on
its sites will lift AOL's revenue from e-commerce, which is more
profitable than its subscriber revenue, he said.
Dulles, Virginia-based AOL today gave details about how it
will develop software with Palo Alto, California-based computer
maker Sun Microsystems to help companies do business over the
Internet. Sun also will sell Netscape's software for electronic
mail, billing, and other Internet-based functions.
''AOL is still undervalued and its potential has yet to be
fully realized,'' said PaineWebber's Preissler, who rates the
stock a ''buy.''
Software, Services
AOL and Sun first unveiled their alliance in November as
part of a three-way arrangement that came out of AOL's
acquisition of Netscape. Products will include e-mail and secure
messaging, billing and other Web-based software that will be sold
by a 500-person sales force.
As a pair, AOL and Sun present a more formidable challenge
to Microsoft Corp., the world's largest software maker, in the
market for electronic-commerce software. With Netscape's
software, the alliance has products that span from silicon chips
that power computers to popular World Wide Web chat rooms.
The venture, called Sun-Netscape Alliance, hopes to speed
the development of electronic-commerce software and services,
targeting the growing number of companies that sell via the
Internet. Sun and AOL want to give companies the tools they need
to make shopping on the Internet easier.
The first new products are expected to ship in the first
quarter of 2000, and the companies said they expect the new
alliance to be profitable.
Easier Online Sales
Making it easier for merchants to sell goods online is
expected to benefit AOL because the company can earn a chunk of
each sale made through its network. Sun, meanwhile, is hoping to
sell more of its powerful computers used by Internet-related
companies to run their Web sites.
AOL and Sun will split revenue and costs from the alliance
under undisclosed terms. Sun agreed to pay AOL about $1.28
billion during three years for the right to sell the Netscape
products.
AOL also stands to profit from an aggressive acquisition
plan, international expansion and its strategy for providing
Internet access for hand-held electronic devices, Preissler said.
''The Street is now saying that AOL's bottom line is going
to significantly increase once this flood of appliances hits the
streets all over the world,'' Weil said.
Sun shares rose 1 7/16 to 125 15/16. |
