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To: KeepItSimple who wrote (38484)	2/6/1999 9:21:00 PM
From: Impristine	Read Replies (2) \| Respond to of 164685

kis, buddy, i believe in @home long term, i believe the xcit @home deal, will be a success, i have it in a long term account, i don't care what it does in the short term, i will not sell, @home is 100 percent of my ira.....

To: KeepItSimple who wrote (38484)	2/7/1999 11:18:00 AM
From: Glenn D. Rudolph	Respond to of 164685

19 are many industry analysts) are of the mind that broadband services will largely be coming over a cable modem and not the copper plant that xDSL technologies use. If that turns out to be true, then AOL would likely (at some point) need to find a partner to supply the underlying plant through which AOL's 1'5 million accounts could access the Web at high speeds. As we've said in past Capitalists, we still think AOL is in the driver's seat here, since they control the largest interactive (narrowband or broadband) audience out there. That said, if Time Warner is getting closer to AT&T and @Home (either on the technical side or on the business development side) we think it may represent a shot across the bow for AOL. Especially if they (AOL) are be holding out for better terms (i.e. on the ad/commerce split with the cable partner - remember Tom Jermoluk's insistence that he would do any deal with AOL except a “dumb pipe” deal). Even if AOL isn't playing hardball or even if they believe that time is on their side with respect to how fast broadband becomes a reality, the capital markets aren't likely to ignore a partner-less AOL for long given the increased visibility that the broadband issue will have in 1999. Compaq Loosens AltaVista's Tethers After months of time consuming wrangling, Compaq finally announced their plan to spin off Alta Vista (AV) in an IPO sometime later in the year. Though we've got our opinions about the likely success and challenges ahead for Alta Vista, Compaq expects to (1) take advantage of the capital markets by recognizing the locked-up value embedded in AV's traffic and visitors, (2) create an environment of independence and incentive for the folks running AV, (3) lever the advantages of owning hardware assets to drive consumer traffic (a la default home pages and keyboard buttons on Presario PCs). In addition to the spin-out plan, AV announced a deal with Microsoft Network whereby MSN will swap out Inktomi as their search technology provider and replace them with AV, while AV gets a branded version of Hotmail, some instant messaging services, and other, unnamed communications technologies. Though we are heartened by Compaq's obvious commitment, we're of the mind that they've got an awful big hill to climb in 1999 if they hope to become, as they put it, a cross between Yahoo! and Amazon (thanks to the fact that 70%+ of AV searches are product oriented). Despite the very real benefits of hardware ownership, we think the battle for consumers has largely been played out already. Yes, we recognize that the Internet will grow enormously in 1999 (35mm users or more) and beyond, but it's important for investors to recognize that AOL and Yahoo! benefit from network effects, that principle of increasing returns markets that help the big get bigger through word-of-mouth buzz and scale advantages. Will AV be able to grow traffic and users nicely with Compaq's hardware and a $60 million branding budget in 1999? Sure, but this is a game about scale, and at valuation levels like these, you've got to keep your eye on the monsters whose position is (relatively) unassailable. Delta Surrenders To The (Middle)man Last week, we highlighted a particularly aggressive move by Delta Airlines to charge a $2 surcharge for tickets not purchased over the Internet. As we stated, we're big believers in the power of incentives to motivate, and we thought that the $2 surcharge was one of the most powerful motivators we'd seen in the battle to disintermediate travel agents. The real reason for the surcharge, of course, was to weaken (and eventually eliminate) the role travel agents in the industry. The rationale is patently obvious to fans of industry value chains: the more inefficiency Delta can drive out of the process of flying people to and fro, the more margin Delta can absorb from the industry.