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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Jimbo Cobb who wrote (67090)	8/28/1999 10:48:00 PM
From: Captain Jack	Read Replies (1) \| Respond to of 97611

$$$$$ ALTAVISTA SIGNS 225,000 IN TWO WEEKS AltaVista said its FreeAccess no-cost Internet access service has signed up 225,000 new users in the first two weeks. The company will exceed its goal of a million users within a year at the current pace. COMMENT: This is great for AltaVista and its owner, Compaq, but possibly bad for EarthLink (ELNK), Mindspring (MSPG) and AOL. See article below. *&*&*&*&*&*&*&*&*&*&*&*&***& $$$$$ THE BULL MARKET REPORT WORRIED ABOUT AOL COMMENT: Don't jump off the ledge yet, but we are watching AOL. If AltaVista can sign up 225,000 new users of its basic ISP service in two weeks, then why would anyone pay for AOL? Of course, it's not this simplistic, but something to think about, watch and analyze. First of all, AOL's content can be had for only $10 a month if you BYOA (bring your own access.) We do this here in the office. We use an ISP and have AOL for $10 a month. You can do it at home too. If you are paying $22 for AOL now and have another ISP then you can save yourself $144 a year immediately by just clicking on Member Services and Billing on AOL. But let's analyze this. If all of our readers did this and told three of their friends, AOL would be out a few dollars, wouldn't they? Now, take it a step further. Let's say that Dell and Microsoft and Yahoo and Gateway and a bunch of others see that the new FREE ISP model is working. They all jump into the market and instead of 112,000 new subscribers a week signing up for free, we see 500,000 or a million subscribers a week. Now how do you think AOL will fare here? We say, not so good. Sure, AOL will have lots of other surprises for us to generate income but they would have had these anyway. Sure, AOL has weathered some serious challenges from Microsoft and others in the past and has won every time. But the fact remains that millions of people may migrate away from the paid ISP business. So how do we handle this company that we have loved for four years? Remember, the stock has a PE of 172. The stock could fall to $50 and still have a PE of 86, historically very high. And if the earnings model is suffering six months from now because of the free ISP movement, the PE could fall to 30 or 40 which would give the stock a price of $25. Scary? Sure. Likely? Probably not. But when a sea change of this magnitude hits the Internet, we have to be aware of the possible consequences and prepare for it. Because of these scenarios we are placing a mental sell stop in the high 90's. In other words, if the price drops below $100 a share, we are going to look very hard at selling some of our position. We suggest you think about it too, so if the time comes, you will have already though through the situation and can make the appropriate decisions without having to agonize over it.