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

To: Christopher Grace who wrote (6644)	1/1/1998 10:45:00 AM
From: Steve Robinett	Read Replies (1) \| Respond to of 13594

Chris, <<Could someone explain to again why the analysts are wrong,>> In a word, valuation. AOL has an outmoded business model, the Prodigy, Compuserve, content-provider model, that, even with its size, shows the same proportional financial profile as an ISP with 200,000 customers. Though AOL is a "brand name," indeed the only brand name ISP, at almost 5x sales it is given "monopoly pricing" when in fact it has nothing like the relative monopoly of, say, Microsoft or Intel. Though the number of customers increased quarter to quarter, the number of PAYING customers declined, as did ad revenue. To stay with the Microsoft and Intel examples, their future prospects stretch as far as the mind's eye can see. Intel has dominant market position and share and is the low cost producer of pentiums. Microsoft is the dominant software producer with great positioning and share on operating systems and productivity software. AOL, connecting at 56k max, has nowhere to go in the wide-bandwidth world of the future. As an ISP, they are identical to hundreds of ISPs across the country, but with more complaints. As a content provider, they can't compete against say, Disney, or my local shopping mall. Yet they are valued as though they have something extraordinary. I don't say they can't make money--they obviously can--but how much and for how long? If AOL's market cap were 2 or 2-1/2x sales, giving it a share price between $40 and $60, the valuation would be reasonable. The market is pricing in a future for AOL that is unlikely to happen due to their current business model and how they can change themselves into something that can grow revenues and earnings in a way that justifies the current market cap is less than obvious, at least to me. BTW, if you believe that all known analysts' opinions--good, bad, uncertain--are priced into a stock at any given moment, then ANY time you buy or short a stock, you are saying all those analysts are wrong and the stock will do something else. Just a thought. Best -Steve For the record, during the past couple of months, I've play AOL five times, puts three times, calls twice. I made money four times and got smoked once. Short term, I obviously don't care whether AOL goes up or down, just that I get it right. Currently, I think AOL will see $100/shr between now and their earnings. P.S. You're turn. What's AOL worth per share? When is it overvalued?

To: Christopher Grace who wrote (6644)	1/1/1998 11:34:00 AM
From: Mike McFarland	Respond to of 13594

I beleive that an increasing number if AOL members will find out that they can get cheaper more reliable internet access through local ISPs. And those that are not to worried about saving $5 a month may tend toward some of the other national providers like MSN or AT&T Worldnet. I was with AOL for awhile, but I often got busy signals. This has only once happened to me with AT&T Worldnet, where I am now. AOL is a good service for the beginner--very friendly, well policed, and the opening screen sort of gets you started with surfing. But once a person realizes that they really just want usenet and the web, and loses interest in the propriatary stuff...well then I'd think they do the same as me--hunt for a cheaper local service or a more reliable national isp. Now maybe aol has fixed the access problems, they probably have. But the trick is not to ever lose your customers--they can spend the entire amount they made of me in those few months I was with them on CD roms and disk ...but It wont bring me back. Now as far as shorting...I can find things more expensive than aol--Microsoft leaps to mind. But If aol runs up in January it is going to be mighty tempting. I'll just roll my profits from MSFT puts into AOL puts :-)