Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: J.S. who wrote (10287)	6/17/1998 5:02:00 PM
From: Saul H Rosenthal	Respond to of 13594

Here is the Reuters report on the buyout. I got it off AOL BUSINESS NEWS by the way: AOL Investment Snapshot (tm): T or AOL By Jessica Hall Reuters NEW YORK (June 17) - AT&T Corp.'s reported interest in buying America Online Inc. shows the telephone giant is willing to pay for a leading role in the fast-growing Internet market, industry analysts said Wednesday. The Financial Times, citing sources close to the firms, reported Wednesday that AOL had turned down a tentative takeover bid from AT&T. The newspaper said the bid would have been ''comfortably'' above AOL's market value, which was about $19 billion at Tuesday's closing prices. AT&T and AOL declined to comment. ''If this (report) is true, it would be a clear indication that AT&T sees the Internet as the future of communications,'' Jeffrey Kagan, a telecommunications consultant, said. ''It took them a while to realize that -- that the Internet is the future -- but it shows that they are thinking differently.'' AT&T's new chairman, C. Michael Armstrong, has highlighted the Internet as a main growth priority for the company, and AT&T has recently forged marketing pacts with Internet search companies Lycos Inc., Yahoo! Inc., Infoseek Corp. and Excite Inc. Buying AOL would be the ''mother of all deals,'' but it might make AT&T's online marketing alliances unnecessary, one analyst said. Even so, buying AOL would instantly give AT&T a leadership position in the Internet business. AT&T's WorldNet Internet unit has only a fraction of AOL's 12 million customers and provides only Internet access, not online content like AOL. While the benefits for AT&T are clear, industry experts doubt that AOL was for sale. ''I can't imagine (AOL Chief Executive) Steve Case working for someone else,'' said one analyst who declined to be named. ''AOL is Steve Case. He is AOL. Selling would be giving up that autonomy, that creativity and the entrepreneurial spirit that makes AOL work.'' Case sits on the board of one of AT&T's biggest rivals, WorldCom Inc., which is awaiting action from regulators on its planned $37 billion merger with MCI Communications Corp., the No. 2 long-distance company behind AT&T. If Case did decide to sell AOL, he would be more likely to align with an entrepreneurial company such as WorldCom than a more traditional giant such as AT&T, analysts said. One analyst estimated AOL could fetch more than $30 billion based on the value of its online service and earnings potential for its other online businesses. ''I've told our sales force for some time that one of the biggies -- AT&T, Disney, IBM -- could make a bid for AOL,'' Friedman, Billings Ramsey analyst Ulric Weil said. ''We're talking something in the $30 (billion) to $35 billion range.'' AOL stock jumped $4.50 to $93.50 in active trading on the New York Stock Exchange where it was one of the day's biggest gainers. The stock had climbed $3.875 Tuesday. AT&T rose 87.5 cents to $62.81, also in consolidated NYSE trading at midday. REUTERS Reut12:35 06-17-98

To: J.S. who wrote (10287)	6/17/1998 5:23:00 PM
From: Andrew Furst	Read Replies (2) \| Respond to of 13594

I'd guess that AT&T offered about 500 million shares worth of stock (theoretically worth over $30 billion), but AOL was smart to reject AT&T's offer. AT&T shares are tremendously overpriced, IMO - and their CEO Armstrong knows it, that's why he's out to buy what he can with AT&T shares while they are still high. I still like AOL long term, and the rumored offer from AT&T is somewhat flattering. The only thing is, I'm not sure AT&T's offer, reputed to be "comfortably above" $19 billion really validates the market cap of AOL - because the currency they would be using (AT&T shares) is so overpriced. I feel an offer from a more soundly valued company (such as GE, or IBM) would go further to validate AOL's market value than one from AT&T. AT&T's assets aren't significantly greater than Sprint's, yet AT&T's market cap is more than 3 times Sprint's market cap. The difference of course is "brand name", i.e. AT&T has more customers - but not because of a better or cheaper service, simply a lack of knowledge by the public that telecom is a commodity - eventually AT&T's "brand value" will fade, with the advent of a more sophisticated public. AT&T's market value cannot stand the test of time - unless they expand their assets. AOL on the other hand should increase in market value over time, IMO - in fact, if both AT&T and AOL were to remain essentially intact, I would guess that eventually (5-10 years hence?) AOL will have a greater market value than AT&T, even though currently AT&T's market cap is 4-5 times AOL's. Thus the buyout attempt by AT&T was smart on their part, and the rejection of this on the part of AOL was also wise. Personally, I'd like to see AOL remain independent - the shares should be able to go a lot higher on their own than with a buyout of the AT&T variety.