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

To: Eski who wrote (37313)	1/11/2000 6:54:00 PM
From: ALTERN8	Read Replies (1) \| Respond to of 41369

FUND VIEW - AOL has to convince funds on deal By Cal Mankowski NEW YORK, Jan 11 (Reuters) - America Online Inc. (NYSE:AOL - news) has a major selling job to do in trying to convince its shareholders that its proposed merger with Time Warner Inc. (NYSE:TWX - news) is the best strategic move, fund managers said Tuesday. Few were surprised to see shares of both companies drop as the euphoria that greeted the initial announcement a day earlier began to fade. Traders said so-called ``momentum' investors were bailing out of AOL now that it looked like the stock had run into at least a temporary dead end. ``I think it's a little sticker shock,' said Crit Thomas, manager of the Parkstone Large Cap Fund. ``It's a big premium that AOL is paying and AOL is probably going to get its growth rate cut in half.' AOL shares were down 6 to 65 late Tuesday afternoon and Time Warner Shares fell 5-5/16 to 84-3/4. The shares of Time Warner surged on Monday after the deal was announced. Thomas noted the transaction does not provide a ``collar' to provide for Time Warner shareholders to get more shares if the price of AOL drops. Without the collar, frequently used in stock deals, Time Warner shares were moving more or less in tandem with those of AOL. But the proposed combination got a strong endorsement from Alexander Cheung, portfolio manager of the high-flying Monument Internet Fund. Speaking to reporters in a conference call, Cheung said the lower growth rate is based on old business models while a combined AOL and Time Warner will create a new model as it enters new markets. ``That growth rate will be rejuvenated,' he said. ``We are optimistic on the combination. I will be watching them very closely but I believe in the long run that they will have a very good position, a leading position, in the new economy.' Asked if he was planning to buy more AOL stock, Cheung responded that he has bought on downdrafts before and ``it's likely that we would buy a little bit more.' AOL is already one of the five biggest holdings in the fund. But with 1,424 mutual funds owning AOL, according to a count by Morningstar Mutual Funds, it was clear many managers were not waiting around for a rebound. ``Take your money and run; that's what's happening,' said a Wall Street trader. ``I think it's momentum players saying this is as good as it gets.' But the trader, who did not want to be identified, predicted the deal would be completed. The transaction, which requires approval of shareholders of both AOL and Time Warner, is not expected to be concluded for about a year. For many fund managers, it was clear the nature of AOL would undergo a fundamental change. ``There is no question that it changes the complexion of the company,' said Shannon Reid, manager of the Evergreen Select Strategic Growth Fund which has AOL among its larger holdings. ``Once this deal is consummated AOL is no longer the hyper-growth company that it has been for the past five years.' Reid said he is holding on to his AOL shares but he agrees that some holders will start looking for other investments. Thomas, who owns not only AOL but Time Warner as well, noted that holders of the media giant are getting a premium takeover price and an accelerated growth rate. But he said AOL will have to do some ``hand-holding and explaining' if its stock continues to fall. The Parkstone funds are part of Cleveland-based National City Corp (NYSE:NCC - news) and the Evergreen funds are part of First Capital Group, the institutional investment arm of First Union Corp. (NYSE:FTU - news)