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

To: Paul Houle who wrote (6667)	1/6/1998 1:33:00 AM
From: WBendus	Read Replies (2) \| Respond to of 13594

AOL Will Fall A couple of days ago I started the release of my reasons why AOL will fall dramatically during 1998. My first two points centered around tax related issues which would bring about additional selling in the early parts of January and the fact that there has been a lack of technical confirmation on the recent advance in price. I am proud to report that the technical divergences which I was speaking about a couple of days are still showing signs of divergence and, in my opinion, the technical picture still looks very weak on this stock. Tonights points will focus on the signs coming form the market and the hype diseminating from the company. When a company that is expected to report over $2 billion in annual revenes starts to announce that it is signing contracts for $5 million, this should come as a big warning sign. The contract announced on December 30th between AOL and Cybermeals marks as one of the prime examples of the type of hype which for a short time artifically susports a stock's price. This company is becoming infamous for distrubuting meaningless press releases whose only function are to hype the company and its stock. Consider these recent examples, none of which really offers any value to investors. Mon Jan 5 AOL Digital City Adds Salt Lake City and Phoenix to its Local Information and Entertainment Sites On America Online and the Web Wed Dec 31 AOL America Online Offers Post-Holiday Help for Computer Upgraders And New Owners Tue Dec 30 AOL America Online to offer takeout meal service Tue Dec 30 AOL America Online, cybermeals Announce New Commerce Partnership Wed Dec 24 AOL American General Ventures Inc. Provides Wal-Mart Online with Notebook Computers. Tue Dec 23 AOL 'Kids' from 1 to 92 Have Written to, and Heard Back from Santa through AOL -- Have you? Mon Dec 22 AOL America Online Reports Top Selling Gifts In Cyberspace Thu Dec 18 AOL Do You Consider Yourself A Last Minute Shopper? Nothing of value in any of these stories except for hype. Beyond all the hype that is surrounding this stock, you must also look to the market for confirmation of the stocks surge. If we are all to beleive that the internet is growing by leaps and bounds, then we should expect to see this belief reflected in other segments of the market. All of this additional demand on the infrastructure of ISP's would mean that there should increasing share prices, revenues and profits for the companies that supply ISPs with networking gear. Stocks such as COMS, CSCO, ASND and BAY should be climbing, and rather than hearing inventory buildup concerns from COMS, we should be hearing about how they can not keep up with the demand. I think that one of biggest concerns for AOL should be the fact that modems are sitting around in inventory at companies like COMS. This should be particularily alarming and it is a warning sign that the growth of telephone connections to the internet may be coming to a dramatic slowdown. Networking stocks and internet stocks should go hand-in-hand in terms of their performance. Wayde. PS. More reasons will follow over the coming days and the reasons will get stronger.

To: Paul Houle who wrote (6667)	1/6/1998 2:09:00 AM
From: Steve Robinett	Read Replies (1) \| Respond to of 13594

Paul, Actually, I agree with most of your points. I just put a somewhat different spin on them. I agree that "AOL's success has sprung from marketing and simplicity of use." It's the ISP a lot of people try first and their massive marketing--I just got another disk the other day stuffed into my LA Times--has made it a brand name, probably the only brand name ISP. As for the "criticle mass" that has produced, I assume you mean enough subscribers to stay alive, yet financially they look pretty much the same as smaller ISPs, proportionately larger but not much more profitable. A question also comes up about reaching a point of diminishing returns. When internet popularity levels off and the population on the net goes from newbie to "oldbie," will massive marketing get AOL anywhere? True, AOL has "aggregated (and sometimes pioneered) these services," which is no guarantee they'll be around to enjoy the fruits of their pioneering efforts. The parallel cable that goes from your computer to your printer is designed to a standard pioneered by a company called centronics, now defunct. Often survivors are "me-too" companies like Microsoft and IBM. I also agree with you that "until there is widespread source of and demand for high-bandwidth information, I don't see AOL crashing and burning solely due to it's reliance on a POTS-line network." Just as computer hardware is sold by software, the demand for bandwidth will be driven by web programing, not just speed jumping from site to site but something lively going on at a site that requires more bandwidth to use. The most obvious upcoming example is HDTV, scheduled to begin transmitting over the air in November of this year. The so-called convergence of TV and computers can't be done on POTS. I've even run into a few massive Java applications recently that demand more bandwidth. Just a couple of examples of content that potentially pushes the bandwidth envelope. As for a "credible alternative," I mentioned the Time-Warner/US West cable service. I'm sure Time-Warner, with its enormous movie library to rent online, would like to see as much bandwidth as possible and are trying to design just such an alternative. They won't be alone. You mentioned Microsoft, which has a big stake in cable these days. I doubt it's because Bill Gates likes watching the cooking channel. Again, I agree with you AOL isn't going to crash and burn immediately. I'm just wondering longer term what AOL does for an encore to stay alive and grow over the next ten years. As I've said a number of times, it may just be my own lack of imagination, but I don't have an answer to that longer-term question and I suspect AOL doesn't either or we would have seen the germ of that idea developing already. Best -Steve

To: Paul Houle who wrote (6667)	1/6/1998 3:14:00 AM
From: Brent D. Beal	Read Replies (1) \| Respond to of 13594

*AOL's success has sprung from marketing and simplicity of use, and the subsequent critical mass produced. * You couldn't be more wrong. From a cumulative standpoint, AOL still hasn't made any money. . . none . . . not a dime. Sure, they may one day be a success (I doubt it, but everyone has their own opinion), but they haven't proved a thing yet. . . What they have done is turn their stock into tulip bulbs, which isn't the same thing. . . You might as well argue that Bre-X was success. . .