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

To: Jorge who wrote (13023)	12/23/1998 10:37:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 13594

George, thank you for the warm welcome. You've pretty much summarized the reasons I invested, so there is little I can add, other than the wish for all to have a wonderful holiday! TTFN, CTC

To: Jorge who wrote (13023)	12/23/1998 10:41:00 PM
From: voop	Read Replies (1) \| Respond to of 13594

Hi I am a long term AOL holder who has an enormous potential capital gain who wants to remain invested but would like to protect the downside. Any advice re buying puts ( Iam a buy and holder and am big time kniave) versus shorting against the box. Not sure how to proceed. Other stategies? thanks to all. A goood problem to have. VOOP

To: Jorge who wrote (13023)	12/24/1998 12:48:00 AM
From: Dan Woodbury	Read Replies (2) \| Respond to of 13594

I'm neither long or short AOL. My question has to do with how AOL can benefit from the transition from dial up connections to direct internet connections (DSL, cable internet, ...) Back in late 96 and early 97, AOL stock dropped precipitously as Wall Street questioned how AOL would transition its proprietary network to the internet. AOL made the transition by making it easier for its customers to connect to the web via AOL's network but it has still persisted in developing proprietary content (although I understand much of it is mirrored on the WEB). Without a doubt, AOL's best asset is its customer base, although I would argue that AOL's 14M users pales in comparison with the hundreds of millions of web users who don't need/want/care for AOL. The beauty of AOL is that it is probably the best nationwide ISP. AOL's curse is that its roots and core business model are in being a proprietary network. Once you remove the ISP revenue from AOL it is no better than Yahoo or any other web portal. But what happens when people start signing up via GTE or TCI for direct internet access? At this point, GTE will expect customers to pay $40-$60 a month just for the connection. A connection directly to the internet - not to AOL's propietary network. How can AOL then expect customers to spend another $10-$20 to access the AOL network when just about anything AOL provides can be found for free on the WEB? One option would be for AOL to cross-market with the DSL/cable internet providers. But if AOL does that you would expect their piece of the pie to be a fraction of the monthly premiums they currently receive. And why would customers pay that little extra each month to support AOL when it is questionable what AOL's network provides that the web doesn't. The problem for AOL, and for any internet company at that, is that no company owns the network. In this sense, internet companies are no better than the media companies who compete amongst each other for eyeballs. This competition is very fierce and expensive (my understanding is that all major networks are break-even at best) and enjoy very slim profit margins. The conclusions I reach when considering AOL, Yahoo and web companies in general point to a windfall for consumers but a dog-eat-dog world for the portals/e-tailers and consequently poor returns for investors. Here's why: 1) All indications are that the biggest war to be fought is in who will provide the data connection to your home. It will either be a telco or a cableco but the dish / satellite dealers may also compete to some degree. 2) Consumers will pay for an internet connection (see #1) but it is questionable how many will be willing to pay a premium to belong to someone's proprietary network. This does not preclude customers paying for access to individual websites but it does question what value a proprietary network would add to the existing (basically free and anarchistic web) 3) Competition amongst web portals and e-tailers for eyeballs and e-commerce will be a boon for the customer. There is little question that web related revenues will continue to grow rapidly. However I greatly question the ability of any web company to generate and maintain high profit margins (ie > 15%). My guess is that when it is all said in done, the successful web site companies post profit margins of 1-5% which is on the scale of brick & mortar retailers. If anyone can explain why a web company would do better than this I would love to hear the explanation) So the bottom line for AOL is how will it differentiate itself and add value to its customers once the uniqueness of its dial-up network diminishes?

To: Jorge who wrote (13023)	12/24/1998 12:57:00 AM
From: Dan Woodbury	Read Replies (1) \| Respond to of 13594

Jorge said about AOL growth: I'm thinking several hundred percent per year for 2-4 years anyway, then I'm not sure after that... First, such growth would puts AOL's value at 200B to 800B in 2-4 years. If AOL's market cap ever exceeds that of General Electric than I will know that the Apocalypse is near. Second, while I see AOL as being a very forminable competitor to Microsoft in the internet media market (ie e-mail, web hosting, e-commerce...) don't forget that Microsoft has 2 monopolies/cash cows that AOL can never reproduce. One is the Windows OS and the other is Microsoft Office. Those two products alone generate 10B a year for the Big M and no company has anything that can challenge it. In fact, AOL is pretty much dependent on Microsoft's growth for it to grow. The bottom line is I don't know how AOL or any internet company for that matter will be able to use its bottom line to justify valuations in the tens and hundreds of billions.