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To: Rob S. who wrote (49174)	4/6/1999 7:55:00 PM
From: Glenn D. Rudolph	Respond to of 164684

By Steve Frank THE WALL STREET JOURNAL April 6 — It's been a big week, already, for America Online. The stock is at a new high; its shares are up more than 10 percent over the past two days. The Internet service provider's market cap now places it among the top ten biggest companies in America. And rumors swirled around Wall Street over the last two days that the young Internet firm is interested in acquiring the venerable CBS Corp. network. These factors all point to one clear conclusion: AOL, by any measure, has arrived. Is it too late to invest in AOL? Weigh UNLIKE MANY of the other titans of U.S. industry, AOL's history is short and dramatic. In 1993, for example, America Online was a tiny Internet service provider with little in the way of revenues and nothing in the way of profits. That same year, Louis Gerstner took the helm of one of America's biggest companies, IBM, and initiated a multi-year turnaround that is one of the great success stories of modern business. Just six years later, AOL has grown tremendously. Last year it had revenues of $2.6 billion and profits of $92 million. That's still a lot less than IBM, which had revenues of $82 billion and profits of $6.3 billion, but it's not bad. So which company is worth more? AOL, naturally. Its market capitalization is $173 billion. IBM's is only $169 billion. But AOL's market cap trumps lots of other big companies, as well. AT&T's is $168 billion. Coca-Cola is at $147 billion, and Disney is at a mere $63 billion. What makes the AOL story particularly remarkable is not just that it represents — by almost anyone's definition —- the ultimate example of Internet euphoria, but also how quickly it came to that position. It was only three years ago that AOL earned the sobriquet “America On Hold,” because its customers had problems logging on to the ISP. A number of financial problems and accounting concerns also raised questions about the company's long-term viability. Now, some investors speak of AOL's unassailable position and its “blue-chip” status. Data provided by Microsoft Investor One sign of AOL's sudden ascent is the market's interest in reports that AOL might be interested in acquiring CBS. AOL's market cap is five times the network's. And the two companies have already talked on other subjects. In January, AOL agreed to name CBS as its exclusive broadcast news partner. Shares of AOL and CBS rose this week on the takeover rumors. But sources close to both companies say reports of an imminent deal are baseless. EASY COME, EASY GO? ‘The user reach supported by the Internet leaders may be of ‘Microsoft-ian' and ‘AT&T-ian' proportions or higher.' — MARY MEEKER Internet analyst, Morgan Stanley AOL's soaring stock price has made its investors happy. But not everyone is encouraged by the run-up in AOL and other Internet stocks. “One of the reasons I believe this revolution has caught on so fast is because of the ease of entry into this particular market. The very forces that have made it spread so fast around the world are going to be those forces that make it so difficult to maintain margin, develop a brand name and create profits,” said Jeremy Siegel, a professor at the Wharton school of business. Of course there are those like Morgan Stanley analyst Mary Meeker who say sky-high market values like AOL's do have a rational basis. “The revenue/profit streams that accrue, in time, to the Internet leaders should be broad-based and recurring,” she said. She adds that “the user reach supported by the leaders may be of ‘Microsoft-ian' and ‘AT&T-ian' proportions or higher.” But others, like Charles Schwab's co-chief executive David Pottruck, remain agnostic. “People are seeing the incredible possibilities of the Internet. We live in a communications age. They see these possibilities and they don't know how to value them. How big can these companies grow? What types of revenues and new types of businesses can grow out of what are really just acorns? We're in the third inning, at best, of a nine-inning game,” he said. Professor Siegel has a bleaker outlook. He says that because the Internet is the ultimate democratizer, with virtually no barriers to entry, there is no way to sustain profit margins over the long term. Given that, he says, as quickly as AOL's name came to be synonymous with the Internet it could go ba