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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (1685)	6/21/1999 5:46:00 PM
From: porcupine --''''>	Read Replies (2) \| Respond to of 1722

[GM's Internet Strategy (cont.)] "AOL Fills A Gap With Hughes Satellite Deal" By Nicole Volpe -- Monday June 21 4:44 PM ET NEW YORK (Reuters) - America Online Inc. (NYSE:AOL - news), the leading online service provider, Monday said it would make a $1.5 billion investment in Hughes Electronics Corp., the owner of DirecTV, giving AOL a means to offer high-speed Internet services via satellite nationwide. The investment in Hughes, a satellite communications company that offers digital TV and Internet access, represents the largest cash investment ever made by AOL, officials said. AOL Chief Executive Steve Case said the partnership would allow AOL to offer high-speed Internet access to the one-third of U.S. households, mostly in rural areas, that will not be wired for high-speed cable or phone lines by the year 2003. ''What this alliance does is give us a national footprint for high-speed Internet access,'' Case said in a telephone interview. ''Even if we had deals with all of the cable providers and telephone companies -- and we don't -- we would not have this national reach,'' he said. AOL and other Internet companies have complained to regulators that cable companies are locking them out of their market by bundling online access and other services into a single price. AOL, along with other Internet companies, has complained to regulators that cable companies are locking them out of their market to broadband cable customers by bundling access and services provided by companies into a single price. Many analysts forecast that most U.S. consumers will use cable television links to receive fast Internet connections versus high-speed phone lines and to a lesser degree, satellites. AT&T Corp. (NYSE:T - news), the emerging powerhouse of the U.S. cable industry, requires customers who want high-speed Internet access to purchase the services of AtHome Corp., a cable-owned provider controlled by AT&T, for a single price. ''It is clear that by going to satellites, AOL is trying to cover its distribution bases,'' said Gary Arlen, president of Arlen Communications. ''It certainly makes it a race between satellites, phone wire and cable access.'' Arlen said he estimated some 2 million to 5 million AOL subscribers could be satellite customers by 2003. AOL counts 17 million subscribers to its flagship AOL service and another 2 million to CompuServe, and millions more to Web-based services. Hughes Electronics Chief Executive Mike Smith said in a conference call with reporters that the so-called ''AOL-Plus'' high-speed service would be offered as part of Hughes' DirecPC service, which currently counts 100,000 customers. ''We have not promoted DirecPC due to financial constraints,'' said Smith, adding that the AOL brand name and investment will help immensely. ''This is a way for DirecTV to catch up with cable,'' said Armand Musey, a satellite communications analyst at Banc of America Securities in New York. ''It's a race for the middle ground, as satellite TV is trying to upgrade and cable trying to roll out as fast as possible,'' he said. The AOL-Hughes alliance builds on an earlier deal, announced in May, under which the companies will develop a ''combination'' set-top receiver to make DirecTV/AOL TV available to consumers next year. ''We're interested in this idea of 'AOL Everywhere,' extending services across all broadband technologies,'' Case said. Case described ''a highly connected society'' in which AOL services could be accessed through television and other household appliances, as well as handheld devices and computers. ''If you are watching the Super Bowl, you can then access a sports site, or pull up your buddy list to start a chat about the game or access your e-mail during a commercial,'' he said. Separately, Hughes struck a deal with Intel Corp. (Nasdaq:INTC - news), the leading maker of computer chips, for Intel to supply chip technology for use in Hughes set-top boxes used to convert satellite signals. The first of these products will be the AOL TV satellite receiver. Terms were not disclosed. AOL's stock, the New York Stock Exchange's most active issue, was up $1.88 to $115.31 late Monday afternoon. Hughes, a separately traded unit of General Motors Corp. (NYSE:GM - news), was up $2.31 at $55.75. GM added $1.06 to trade at $63.94. On the Nasdaq, Intel was $1.875 higher at $56.81.