A Review of AOL Company Profile

We feel that it is inside long-term interests of AOL to produce the required concessions; that AOL will make this kind of concessions, and that the merger with Time-Warner will be approved by regulators in both the European Community and also the United States.

AOL's subscription has soared past 26 million paying subscribers. We believe that subscriber growth at AOL will continue, and that this growth will place the company in a powerful position to thrive inside a future environment where subscriber fees are not at the core with the corporation's financial model. Subscribers provide a solid base for the advertising and marketing of e-business, e-business services, and advertising sales.

The advent of AOL-Time-Warner ways that AOL no longer can also be analyzed solely inside the confines of World wide web services, personal computer services, or e-commerce. Probably the most obvious transform within the industry mix introduced by AOL's acquisition of Time-Warner are T-W's operations in entertainment and publishing. A much less obvious, but, we believe, equally crucial adjust to AOL's marketplace orientation stands out as the corporation's future evolution into a full-fledged telecommunications services provider.

While consolidations are occurring rapidly during the Internet services and computer services industries, none on the mergers thus far look to constitute a powerful threat to AOL's dominant position.

The actions of AOL over the past 3 years, in addition to continuing operations, reflect a growth strategy in accordance with an expansion from the scope in the corporation's operations, both inside its existing marketplace orientations and across compatible industries. Alliances and strategic partnerships are 1 with the 3 legs in the AOL growth strategy. Strategic acquisitions via merger are the second essential leg of this strategy. Powerful ongoing growth within the corporation's existing corporation operations are the powerful third leg of this growth strategy.

As the facts presented from the chart around indicate, however, the market cost of AOL stock has declined to a higher extent within the first-half of 2000 than has the broader marketplace as indicated by the S&P 500 average. With respect to Internet-based stocks generally, however, AOL common stock, in our view, has not performed badly. In fact, the modern P/E of 127.7 for AOL well-liked stock, in our opinion, provides a positive outlook for your future industry cost in the stock. The current P/E ratio seems being sustainable, whereas the P/E ratios in 1997 (274.3), 1998 (443.2), and 1999 (187.3) clearly were not sustainable. Further, our opinion is buttressed by the solid operational performance on the business in 2000.

ecommunications giants with Net services and personal computer services firms, however, might improve the equation. Whilst WorldCom's attempt to merge with Earthlink (itself recently merged with MindSpring) seems to have been thwarted by American regulators, we feel that such mergers will arrive to pass sooner instead of later. Terra Networks, Spain's leading telecom, has acquired Lycos. We think that other such mergers are certain to follow; that major telecoms during the United States will purchase World wide web content provider

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