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

To: DepyDog who wrote (35653)	12/20/1999 5:43:00 PM
From: TARADO96	Read Replies (2) \| Respond to of 41369

GM, AOL Near Agreement On Online Car Selling By MARK YOST DETROIT -- General Motors Corp. (GM) and America Online Inc. (AOL) are close to signing a wide-ranging agreement that includes a joint venture in online car sales and online advertising, sources close to both companies told Dow Jones Newswires. Under the agreement, expected to be finalized in the next few weeks, AOL is expected to set up a GM channel on AOL that will send viewers directly to GM's BuyPower home page for online car sales. In exchange, GM is expected to buy an unspecified amount of advertising on AOL in return. As part of the deal, AOL is also expected to provide online services to OnStar, GM's in-car information and emergency-response network. Both GM and AOL declined to comment. More important than the pending online partnership, analysts said, is the possibility of a future joint venture that would deliver AOL's content and services through DirectTV, the satellite-television network operated by GM's Hughes Electronics (GMH) unit. "This is an opportunity to create a business model in which Hughes, GM and AOL all bring something to the table," said Gary Lapidus, auto analyst at Goldman Sachs & Co. For GM, AOL brings expanded content at a time when the Detroit auto maker is trying to grow its OnStar customer base to one million subscribers from 100,000 and add some teeth to eGM, the online subsidiary charged with incorporating the Internet into all facets of GM's operations. OnStar hopes to increase subscription rates over the next year through Virtual Adviser, a new in-car voice-command service it unveiled in November that allows drivers to hear stock quotes, news and e-mail. The benefit to Dulles, Va.-based AOL, analysts said, is immediate access to OnStar users and future access to DirectTV's current 7.9 million subscribers. "AOL's focus is on the number of eyeballs that see its service," said Lapidus. "With OnStar, GM brings eight million potential dashboards to the table." "This could be an important leap for AOL," said David M. Garrity, auto analyst for Dresdner Kleinwort Benson. "DirectTV would get AOL into the entertainment/infotainment arena," and give it solid footing to compete with Microsoft Corp.'s (MSFT) WebTV initiative. It'll also help GM compete with crosstown rival Ford Motor Co. (F), which recently announced a similar online car-shopping joint venture with Microsoft. An added attractive possibility of the GM/AOL deal: spinning off parts of GM's Hughes unit into a separate joint venture with AOL. For the past six months Wall Street has been clamoring for GM to spin off Hughes. Under the scenario analysts would most like to see, GM would spin off a third of Hughes to current GM shareholders, transfer another third to its pension fund to reduce future liabilities, and spin off the other third into a joint venture that would keep Hughes' most valuable assets - DirectTV and its satellite network. Some analysts think AOL would be a perfect fit. Some of the groundwork already has been laid for a DirectTV/AOL combination, analysts and company insiders noted. In June, AOL paid $1.5 billion for a future stake in Hughes. Under the terms of that agreement, the $1.5 billion went into convertible preferred stock paying 6.25% a year in interest for three years. In addition to the interest, Hughes agreed to spend $200 million for online advertising on AOL. After three years, the preferred stock will automatically convert into GM Class H common shares, the tracking stock for Hughes. The number of shares AOL receives will be based on Hughes's market price at that time. Based on the price of Hughes stock in June, AOL would have had less than a 4% stake in Hughes.