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Technology Stocks : America On-Line: will it survive ...? -- Ignore unavailable to you. Want to Upgrade?

To: Yikes who wrote (5257)	10/26/1997 7:50:00 AM
From: Zoltan!	Read Replies (1) \| Respond to of 13594

Very well-reasoned and persuasive post. The only thing that has prevented me from shorting AOL (aside from the fact that I have never shorted any stock) is that everything about AOL has been so counter intuitive. It should stressed that the bulls were wrong all along about AOL's profitability. As for Cramer, I too did the freebie and you're correct, he reserve's shorting to very rare instances indeed: "that unless you actually had an edge, you knew something about X's competitors that X didn't know, price cuts, inventory bloat, whatever -- or you knew that X's products cause brain damage -- the short would kill you before it would make you a dime. Shorting on a price basis is the quickest way to the poorhouse." What's different now: Most of the analysts recommending AOL do so because of its alleged brand equity, citing Coke or even Disney. The problem is that the analysts have missed the fact that a major component of any brand equity is consumer loyalty and satisfaction. AOL scores very low on both, demonstrably below its competition. AOL has seemingly flourished because for many, if not most, it appeared to be the only game in town. However, there is now proof that that has changed, i.e., the survey that I cited. (It might help that that survey was on the interactive WSJ's front page, which often parallels the print version). Hopefully that "new" reality may assist the reversal of AOL's ridiculous stock valuation. Regards

To: Yikes who wrote (5257)	10/26/1997 8:35:00 AM
From: KM	Respond to of 13594

Yikes: I'm thinking about jumping on the short bandwagon here myself but I must defend Cramer a little. He's more than a "CNBC personality" and "commentator". He's a professional hedge fund manager and was at Goldman Sachs before that. He's also a securities lawyer. I've been following Cramer for several years and he is an outstanding trader and stock picker. He cautioned against shorting Dell this summer when everyone in the civilized world (including me) was doing that and he was right. This is much the same thing although the fundamentals here are not in the same universe as Dell's. He does a lot of short term trading in his fund but they also have longtime core positions. After I read his column about AOL, I decided to hold off a little longer.

To: Yikes who wrote (5257)	10/26/1997 12:22:00 PM
From: MW	Read Replies (5) \| Respond to of 13594

Yikes: A friendly bear- what a rarity on this thread. That makes at least 2 of you [hi investor-ex]. A very insightful post. I am a long time bull but admit I can't justify the valuation at this time, though I'm far from convinced that this co is on the verge of a major tanking. IMO too much is still up in the air to make a definitive case either way at this time and price. A few points for your consideration. 1. Subscribers-- bears question the sub # . I don't. I don't see how aol could have had such access problems unless a huge customer base was swamping the system. Even now , despite a massive amount of investment in pop's there still are occasional problems though, not nearly as bad. Where I live on Long Island I once had 4 #'s to choose from , now I have at least 10. Whether aol can continue to grow their sub base is the critical question and there I can only say they have done a masterful job so far. If and when I see problems in sub growth I will reevaluate. My guess is you will see subs hit the 10000000 mark by the end of the year. We will see. 2. Accounting restatements-- this is an industry in the early stages of creation and it is very understandable that certain income and expense items might get reclassified as the business model gets better defined. I'm not sure who the auditors are{ guaranteed big 3} but in no way would they have intentionally mistated #'s or let aol lead them the wrong way. They are professionals and have reputations at stake which they would never jeopardize for one co. This is a non- issue. 3. Brand name--I read on this thread that aol has poor service and no brand loyalty. I'm here to tell you this is not true . I and many people I know love aol and have no intention of leaving. In time I'm sure aol will be as state of the art as any isp out there and at the present time it's capability's are quite adequate. 4. Management-- Steve Case et. al. have done a masterful job so far and I don't see any reason to doubt that they won't be able to adapt to a constantly changing business climate and do whatever is necessary to broaden and strengthen the huge lead that aol has created in this market. Now, do these points add up to a 10.5 billion $ market cap? Who knows- we will see. I wouldn't buy it here but I already made my money. But IMO aol has yet to show any cracks in it's growth. If and when it does, the valuation will come down but until then you are playing with fire. Be careful you don't get burned along with everyone who has been shorting this baby for the last 50 pts. After all if the price was absurd at 40,50,60,70,80,and 90 it could just as easily be more absurd at 110,120,130,140 etc. Regards, MW