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

To: RLM who wrote (7822)	2/13/1998 1:13:00 PM
From: Keith J	Read Replies (2) \| Respond to of 13594

Regarding operations. AOL is recording a 2 cent gain per quarter for the next 5 years in relation to XCIT stock. This is independent of whether they sell any or not. If they sell, then they'll have additional gains. I don't see why AOL would want NSCP. They already are using the MSFT browser. I don't think AOL wants to be highly into the "business" market, and that's NSCP's strength, besides the browser. Everything you hear from AOL is content, but is directed mainly at consumers, not businesses. Article somewhere that an AOL MF posted: www4.zdnet.com My response: Couple items in regard to the news article. Has anyone seen any ISP come out and raise prices since the AOL price hike? I haven't. With respect to comparing AOL to YHOO based on current revenue? Two things here. One is that many would argue YHOO is way overvalued itself. And two, YHOO is growing revenues much quicker than AOL is, so it's hardly an even comparison. Everen believes that AOL's "cost" is about 25 cents (before tax) for each incremental hour spent online. Unfortunately, they included operating profit from the hike, but then compared with after-tax net profit. Also, if this is the case, the average service cost to the company for an incremental user last quarter was only $5.25 per month (21 hours/month average). Does this number seem low to anyone else beside me? Look at it this way (even though this is probably not exactly proper). Figure 750,000 incremental users last quarter each paying for unlimited use. That would be an incremental 33 million dollars to pre-tax operating income over the prior quarter (actual numbers for the quarter was about $45 million in subscriber revenue growth, so this is pretty close). However, AOL's operating income rose by only $7.5 million (the other parts of operating costs and change in service use were close to offsetting, and this was even with the benefit of $17 million in service rebates and additional "other" revenue which must have contributed to the operating profit). So what happened to the operating income of these incremental subscribers? KJ