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To: musea who wrote (398)	1/11/2000 10:29:00 AM
From: Steve Robinett	Respond to of 419

--musea You ask, Why would the value of TWX decrease from this merger? My suggestion was that the combined AOL/TWX would have a slower overall growth rate. Part of the valuation of any company has something to do with compounding its currently perceived growth rate out into the future. AOL has two businesses, ISP and portal. The ISP business is a low margin business and the company's projected growth--the growth discounted in the stock--comes from the high margin advertising and ecommerce business, currently about 23% of AOL's revenues. TWX, year over year, is hardly growing at all. Consequently, AOL's high growth area--the 23% high margin revenues--now has to drag two millstones, the ISP and the content businesses. That reduces the value of the whole. That's longer term. Short term, arbitrage to balance the market relative to the terms of the merger will push AOL's stock down, probably to at least the low 60s, say, 63 if TWX stays around 90. Just an opinion. Best --Steve