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Technology Stocks : America On-Line: will it survive ...?
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To: Joel Sternberg who wrote (1990)2/28/1997 10:55:00 AM
From: Todd Daniels   of 13594
 
>Perhaps we can do a little math here. Let's assume that 1 of 8
>million AOL members sign up for Tel-Save. Let's say they each
>spend $50 a month or $600 a year on long distance. That is $600
>million in extra revenue for the tiny $276 million Tel-Save. Now,
>if we assume a 20% margin, Tel-Save will bring in an extra $120

For openers, Tel-Save's FY96 financials show 13% operating margin.

And $50/mo is 28% more than the average residential LD bill. Maybe
AOL subs' is higher, but data also show that the biggest spenders on
telephone, which tend to be the higher income demographics, are the
least price sensitive. IOW, using averages can really screw up calcs
here.

Back-of-the-envelope `reasonable scenarios' made even by Wall Street
analysts in disregard of solid data available long have been a hallmark of bullish AOL analysis.
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