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

To: Joe S Pack who wrote (6331)	3/10/1999 9:19:00 AM
From: RocketMan	Read Replies (1) \| Respond to of 41369

Grabbed from Yahoo: Merryl Lynch comments on AOL and broadband; seems like a fair comment. The Big Issue: Broadband AOL is accessed primarily over copper telephone wires into the home; the company buys carriage in bulk from the major telecom companies. Over the next decade, however, many of the country's Internet users will upgrade to broadband access, which will likely be delivered with four different technologies: the same old telecom lines (using a new high-speed technology called xDSL), cable lines, wireless services, and satellite services. The threat to AOL is that it won't be able to acquire carriage on broadband networks at a favorable economic rate—and that as a result it will either experience declining margins or gradually lose its subscriber base to broadband providers. We believe that for the next few years anyway, the broadband “threat” to AOL is largely one of perception, not reality. The number of households connected to the Internet via any broadband technology is still less than 1 million—and AOL has 16 million subscribers and counting. If broadband adoption accelerates over the next two years, the number of broadband households might increase to 3-5 million at the end of 2000—and at that point, AOL's subscriber base should be approaching 25 million. Perception is reality, however, and if investors believe that AOL's franchise is in danger over the long-haul, the stock's multiple will contract. For several reasons detailed in our longer note, we are comfortable about AOL's broadband strategy.