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Technology Stocks : America On-Line (AOL) -- Ignore unavailable to you. Want to Upgrade?

To: gc who wrote (23713)	6/22/1999 10:17:00 PM
From: E. Dita	Respond to of 41369

June 22, 1999, 5:05 p.m. PT DULLES, Virginia--America Online shares, which have lost one-third of their value since early April, will rise in coming weeks as the world's largest online service allays concerns about rival high-speed Internet providers and slowing growth in Europe, analysts say. AOL is fighting high-speed cable rivals through two competing technologies--fast service that runs over existing phone lines and broadband delivery via satellites--that may prove more popular with consumers, analysts say. It's also creating content for high-speed access called AOL Plus and hinting that it may offer a free service to attract more European subscribers. AOL's U.S. service, which provides the bulk of its revenue and profits, could reach 30 million subscribers by 2002 from about 16 million members now, investors and analysts say. The company, synonymous with getting online to most Americans, is getting more advertisers and retailers to pay up for the privilege of marketing to its audience. "They're growing at 1 million new subscribers every 90 days," said Bruce Kasrel, an analyst at Forrester Research. "There are only six [Internet service providers] above 1 million, including AOL. Even Microsoft doesn't have that kind of growth power over the industry." AOL has lost 34 percent of its market value since April 6, when it closed at a high of 167.5, although investors have been pouring money into the stock steadily since the start of the year, according to Bloomberg's money flow analysis. The analysis indicates some investors were willing to buy the stock even though they had to pay more than the prevailing market price. Since April 6, trades in AOL completed at higher prices exceeded those at lower prices by $3.1 billion, according to Bloomberg analytics. The broadband battle AOL faces competition from Internet-cable providers Excite@Home, which is controlled by AT&T, and Road Runner, a joint venture between cable giant MediaOne Group, which is being purchased by AT&T, and other technology companies such as Microsoft. So far, cable operators have resisted opening up their networks to let AOL bundle its content with their cable lines. Instead, AOL is placing bets with two rival high-speed Internet delivery methods. The first, called DSL, runs over regular phone lines and will be available in some states this summer for about $40 a month, roughly equal to what cable- Internet service costs, analysts said. The second type of service will be a hybrid of satellite-and-telephone lines that will be ready for consumers early next year and also cost about $40 a month, the company said. The service, which is offered through General Motors' Hughes Electronics, will be about 14 times faster than typical connections today. AOL is investing $1.5 billion in Hughes to develop two-way satellite-Internet connections that should be ready for consumers by 2003. Satellite service enables AOL to reach many consumers that cable and DSL service can't. Still, chairman Steve Case said he won't rule out AOL delivery over cable systems despite its investments in DSL and satellite technology. "I don't think this agreement [with Hughes] precludes our ability to work with cable or "We don't believe [broadband] will hurt AOL's growth. The jury is still out on whether the market will go with DSL or cable," said Youssef Squali, an analyst at Ladenburg Thalmann who rates AOL a "strong buy" and expects the stock to reach $180 in 12 months. Still, some analysts point out that cable-Internet providers could crimp AOL's subscriber growth in a few years if that technology proves more popular with consumers. "As broadband comes to the forefront, AOL will start to lose market share because new users will stray to cable," said Forrester's Kasrel. AOL will "still be the No. 1 signer-upper, but they wouldn't be as dominant."