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Technology Stocks : America On-Line (AOL) -- Ignore unavailable to you. Want to Upgrade?

To: RocketMan who wrote (4813)	2/10/1999 1:53:00 PM
From: Steve Robinett	Read Replies (1) \| Respond to of 41369

Rocket, Your comment on margins is of course correct. If AOL's margins (I assume we're talking about operating margins) jumped to 50%, the share price would obviously do more than quadruple. Which brings up the question of whether AOL can ever increase operating margins to 50%. The last time I figured it out a customer that AOL gets $21.95/mo from costs it about $17.36, probably a little more if online usage has gone up. The AOL model is still to use subscriber fees to pay the bills and advertising and e-commerce revenues to increase margins. Ads and e-commerce last quarter amounted to about 18.5% of total revenues, up from about 16.5% in previous quarters. AOL is certainly making money both in the earnings and cash flow sense but we still don't have much evidence it can grow in more than a linear manner, that is, by adding subscribers rather than leveraging the subscriber base. In addition, 10 years in Internet-land is an eternity. Best, --Steve