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

To: steve lipson who wrote (5745)	11/11/1997 10:44:00 AM
From: jeff c.	Read Replies (2) \| Respond to of 13594

Was it 75.5, then upgrade? Interesting style of movement...guess I'll know which way to go when it hits 75.6 next time j

To: steve lipson who wrote (5745)	11/11/1997 10:50:00 AM
From: J.S.	Respond to of 13594

Steve, I was one skeptical bearish friend that pointed out the online usage disparity even before it was cited by CSRV. I want to know the truth wherever that takes us. AOL is not the worst company in the world. We just can't justify it at this price. Sure, it could be worth this price someday. However, an investor should be rewarded and not just keep the value of her investment if AOL lives up to bullish expectation (remember the low book value, high multiples, and negative working capital). Your bearish friend, Joe

To: steve lipson who wrote (5745)	11/11/1997 11:02:00 AM
From: Steve Robinett	Read Replies (1) \| Respond to of 13594

Steve, IMO the key to understanding AOL's potential is "other revenue." Adding subscribers is all well and good but AOL is not going to get rich cranking $19.95/month out of subscribers for online access. The only way they can justify their market cap is to leverage that subscriber base by selling them something else or advertising to them. "Other revenue" amounts to about 16% of total revenues, up from 11% a year ago but down quarter-to-quarter. IMO most analysts are overvaluing the potential of "other revenue," usually giving AOL a 10x discount. That is, they suggest AOL's other revenue will grow 10x over the next couple of years. AOL is still groping for a way to make that happen. Every other day, they announce some new scheme to punch up other revenue, trying to turn their outmoded business model (the content provider model of Prodigy & Compuserve) into something--they don't yet know what--that will give them an edge. Advertising is their best shot at the moment and they evidently keep pissing off advertisers. Maybe they'll figure out something that works, maybe not. The question's still open. At the moment, IMO, about half the market cap of AOL is religious ferver from analysts who find that AOL stock, a brand name, is an easy sell to gullable investors. Best Steve

To: steve lipson who wrote (5745)	11/11/1997 12:40:00 PM
From: S. maltophilia	Read Replies (3) \| Respond to of 13594

Very interesting quote from Seidman. Here's some more of it that didn't get copied in your excerpt: Unfortunately for AOL, the profit margins are really weak. There's nothing wrong with $19.2 million, but as a percentage of revenue, profit is less than 4 percent. AOL's on a run rate for revenue of more than $2 billion a year, and profits of well less than $100 million. Also, while the year-over-year revenue and profits look mostly good for the September quarter (though operating profit was actually down $12 million or so vs. the same period last year), AOL's quarter-over-quarter growth was not as strong. Online services revenue was up more than 12 percent vs. the quarter ended June 30 and, considering AOL grew its subscriber base by only about 9 percent during the September quarter, that's pretty good. But AOL is putting a lot of emphasis on "Other revenues," which were down more than $2 million vs. the June quarter. Some of this may be as a result of performance of the "soon to be WorldCom's" ANS division, but I read that the straight advertising and commerce dollars were $68 million in the September quarter vs. $80 million in the previous quarter. AOL attributes the difference to more conservative accounting. It did over $100 million in advertising deals during the September quarter that in the old days it probably would have taken total credit for in the September quarter. Now they are booking the revenues over the duration of the deals. AOL also said that it began charging refunds and other credits related to online services against other revenues instead of online services revenues.