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

To: ANANT who wrote (40410)	11/30/2000 6:41:36 AM
From: ANANT	Read Replies (2) \| Respond to of 41369

Comments from Abhishek Gami, William Blair & Co. on America Online Abhishek Gami, William Blair & Co. Interviewed by Nate Hardcastle The Internet Analystsm spoke recently with Abhishek Gami, an analyst with William Blair & Co., who has a STRONG BUY rating on shares of AMERICA ONLINE (AOL). (William Blair has not acted as an underwriter for AMERICA ONLINE in the past three years, but the firm makes a market in the stock. The firm has a policy of not disclosing analyst shareholdings.) [THE INTERNET ANALYST – NATE HARDCASTLE] Why do you think AMERICA ONLINE is a good buy right now? [ABHISHEK GAMI] AMERICA ONLINE is in the process of closing its merger with TIME WARNER (TWX) – the deal should be completed by early 2001. The merger should give AMERICA ONLINE dominant position in the broadband Internet market. The company just signed an access agreement with EARTHLINK (ELNK), which with 4.6 million customers is the second-largest Internet service provider, behind AMERICA ONLINE. The deal will allow EARTHLINK to provide Internet access on the cable network owned by the combined AMERICA ONLINE and TIME WARNER. That agreement is a harbinger. A year from now we'll see many Internet service providers using the AMERICA ONLINE/TIME WARNER cable network to provide access. [NH] How will AMERICA ONLINE make money on the deal with EARTHLINK? [AG] The details aren't clear at this point, but it looks as if EARTHLINK will pay AMERICA ONLINE a per-user fee for access to the network. AMERICA ONLINE should be able to strike similar deals with other service providers, and will continue to provide its own Internet access channel as well. All told, AMERICA ONLINE will participate in the majority of the activity in the broadband access market, putting the company at the nexus of a very fast-growing and profitable space. [NH] How do you measure AMERICA ONLINE's stock valuation? [AG] We use the ratio of price to EBITDA [earnings before interest, taxes, depreciation and amortization], the conventional way to evaluate media companies. By that measurement the stock looks very attractive. It currently trades at a discount to the company's EBITDA growth rate – only the second time in AMERICA ONLINE's history that it has done so. I expect the firm to grow EBITDA 30% this year, and average 25% growth over the next several years. The stock currently trades at about 18-times next year's EBITDA. [AMERICA ONLINE closed at $42.90 on Nov. 24.] ----------------------- 11. Top U.S. Picks Issue #88 A Deal With Earthlink May Help the AOL-Time Warner Merger By Eric Lopkin AMERICA ONLINE (AOL): The company's proposed merger with TIME WARNER (TWX) took a step closer to completion when AOL announced a deal with EARTHLINK (ELNK) under which EARTHLINK will be able to provide high-speed Internet access over TIME WARNER's cable lines. EARTHLINK's deal is similar to an agreement between AOL and JUNO ONLINE SERVICES (JWEB). The two deals, which are contingent on the completion of the AOL/TIME WARNER merger, provide the groundwork for the company to meet the Federal Trade Commission's insistence that the combined company provide open access. Merrill Lynch analyst Henry Blodget said in a research note, "we believe this is the final hurdle to get FTC approval of the deal." On word of the deal, First Union Securities reiterated its STRONG BUY rating on AOL, while Lehman Brothers reiterated its OUTPERFORM rating. Research on AOL was accessed 3,798 times and 134 new reports were added to the Multex.com database from Nov. 13 to 19. For more info on AOL, check out this week's Analyst Spotlight.