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

To: Glenn D. Rudolph who wrote (16672)	5/11/1999 9:10:00 PM
From: Jenne	Respond to of 41369

AOL set to invade living room New set-top initiative quells fears of being locked out of broadband delivery By Charles Cooper, ZDNN May 11, 1999 5:14 PM PT One week ago, it looked as if AOL's goose was thoroughly cooked. A series of blockbuster deals engineered by AT&T seemed to have cut America Online Inc. out of the loop. But one week later, AOL watchers think the company's well on its way toward dominating interactive cable TV in much the same way it dominates online services. And it's a story that had investors pounding the tables Tuesday as the online services giant (NYSE:AOL) soared more than 13 points. Last week AT&T clinched a deal to purchase MediaOne Group, and then received a $5 billion investment from AOL's archrival, Microsoft (NASDAQ:MSFT). MORE FROM ZDNET: AOL, free ISPs in 'Battle of Britain' AOL launches satellite TV program ZDNet Topics: Broadband Some analysts suggested that the deals had reconstituted the constellation of forces in the still-nascent market for Internet-connected devices into competing camps: on one hand Microsoft and AT&T; on the other AOL, Netscape and Sun Microsystems. AT&T, through its TCI subsidiary, is the major stakeholder in @Home Network, the leading provider of cable modem-based high-speed Internet access. But analysts continue to say AOL is, in fact, well-positioned to permeate just about every connected device in the Internet-age home. Indeed, Morgan Stanley analyst Mary Meeker upgraded the company's stock to a strong buy from outperform, citing AOL's "leverage to embrace broadband." AOL already has deals with Bell Atlantic and SBC Communications Inc. to provide its service over digital subscriber line, or DSL, a broadband service that competes with cable modems. Cable modem field remains open What's more, AOL, the world's largest online service, is by no means out of the race where it comes to cable modems. The deal with Microsoft, for example, only covers interactive set-top boxes, leaving open the possibility of a partnership between @Home and AOL. "AOL could represent huge revenues for broadband cable providers," said Krista Bessinger, research associate with Thomas Wiesel Partners. "AOL has intimated that they will use their margins to incent their broadband partners. And on the other hand, AT&T CEO and chairman, C. Michael Armstrong has said he would love to do a deal with AOL." Such a deal wouldn't need to happen in the short term, either. "When they'll really need each other is two years down the road," said analyst Bruce Leichtman of Yankee Group. "Then the cable modem people will have plucked the low-hanging fruit, and will be in need of AOL's 15 million -- or, at that time, 20 million -- subscriber base. They absolutely have a strong hand with 20 million subscribers at that point." Into the living room AOL may not be in the cable lines yet, but in the meantime, AOL Tuesday announced some progress in its AOL TV initiative, which plans to deliver AOL-enabled set top boxes for mainstream consumers by 2000. The Dulles, Va. company said it had entered AOL TV partnership to develop with Hughes Electronics Corp.'s DirecTV, Hughes Network Systems, Philips Electronics N.V., Oracle Corp.'s Network Computer Inc. and National Semiconductor Corp. "This is the first of a series of announcements on bringing connected interactivity to the mass-market consumer," said AOL representative Wendy Goldberg. "This puts them in a position to deliver TV-based access," said analyst Jim Balderston of Zona Research. "They have all the pieces there." He noted, however, that the market for content over such set-top boxes, dominated by Microsoft Corp.'s Web TV, has not yet proven a booming success. Reuters contributed to this report.