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

To: Steve Robinett who wrote (6775)	1/9/1998 5:55:00 PM
From: Brent D. Beal	Read Replies (3) \| Respond to of 13594

The best case scenario would be an short-term run-up do to earnings and the split, perhaps into the high 90s or even the low 100s. This would factor in the split mania and also build in some high expectations for earnings. The time to short would then be right before earnings. Earnings will no doubt be disappointing and we should get a nice pullback. I find it interesting that AOL seems to consistently fall after announcing earnings. This indicates to me that everyone's expectations and overall view of AOL is inaccurate and every quarter, when there's a brush with reality (i.e. the number don't support the castle in the air) the stock pulls back. Just how many times this will happen before people finally begin to realize that AOL is never going to be MicroSoft and is never to going earn substantial amounts of money remains to be seen, although I think the writing on the wall should be fairly clear by now. Here's why: 1) Recent announcement that overall net advertising was not significantly above this time period last year. If the industry didn't get much more advertising that neither did AOL--in fact I think that AOL's a- ate increase will be below those of its competitors, for one its bigger, and second, it just doesn't have as attractive eyeball base as other companies that don't target net newbies. 2) Insider selling continues, need I say more? 3) AOL wouldn't give numbers on Christmas revenue--only lamely stated that it had "doubled"--why people didn't pick up on this little scam is amazing. . . 4) Stock split? Looks to me like they're trying to cover their asses--their hoping that with a split the stock won't get punished as much as it otherwise would when their earnings disappoint. 5) This is the first full quarter that they've had to deal with serious reputational problems. Last quarter wasn't that much affected by their access and e-mail problems, but I think this one will be. I think these issues will start to show up in the churn number and the rate of increase in subscriber counts. I base this on personal observation, which although inaccurate, indicates to me that there is substantial negative word-of-mouth out there among novices concerning AOL. Just the other day I overheard a guy in the check-out stand at Wal-Mart telling the woman next to him (wife?) that a friend of his at work had recommended Myriad, a local provider here in Texas, and had specifically told him not so sign up with AOL. His wife was saying they should use their 50 free hours with AOL and then switch. He said he didn't want to f--- with it and that they just ought to sign up with Myriad. Didn't sound they either one knew what they were talking about, but they had one thing right, AOL sucks. This was only a matter of time--how many surveys and ranking need to come out with AOL ranking worst/last before Joe six-pack starts picking up on it? This is the quarter that we start to see the affect. . . 6) Rumors about a new CEO. Is this true? I don't know, but it just adds to the pile. If I were Steve Case I'd be looking for an exit too. 7) Just received two other ISP offers in the mail, complete with CD-Rom, free software, and free hours. Once was from MSN, the other from a local ISP. I tried both. Both loaded perfectly and ran without a hitch. Both had interfaces that were intuitive. The local ISP took me to My Yahoo!. This is the first time I've seen other free offers and this indicates to me that competition is heating up, even for newbies. If MSN and local ISPs are just as easy to use, cost the same, don't lose your e-mail, don't give you busy signals, and don't shove ads down your throat, which one are you going to use? It used to be that people used AOL because it was the only one that sent them a free disk--not any more! 8. AOL is in a sector with extremely high multiples and incredible expectations. When the sector comes back down to Earth, so will AOL. Even if AOL were a good company that actually made money, I'd think they would still get hurt by the sector trend. In AOL's case, they may lead to the downward trend, but at any rate, the whole sector is in for a correction, which only compounds matters. 9. Hell, I'm tired of listing this stuff--I can think of at least 10 more indication that the end of this absurd party is near--I'm going to enjoy watching AOL self-destruct, in fact, I'd even enjoy it even If I weren't going to profit from it. . .