Copyright 2002 The Atlanta Journal-Constitution
The Atlanta Journal and Constitution
April 30, 2002 Tuesday, Home EditionSECTION: Business; Pg. 1D
LENGTH: 582 words
HEADLINE:
Analysts don't see quick fix for AOL
BYLINE:
SHELLEY EMLING
SOURCE: Cox Washington Bureau
BODY:New York --- As AOL Time Warner's
stock price continues to slump, falling 3.6 percent Monday, analysts are abuzz
over what might light a fire under the share price in the near future.
Their conclusion? There isn't anything.
With no earnings announcement scheduled for another three months, and
the perception that the company has no real plan to keep customers from shifting
to high-speed Internet access offered by competitors, there's little on the
horizon to send the stock price up again.
For the past
week, the stock price has closed below $20, which many analysts had considered a
natural floor, based on the value of its assets. It closed Monday at $18.04.
Reporting first-quarter earnings last week, the world's
largest media company announced the biggest quarterly loss in U.S. corporate
history. Company executives acknowledged their flagship Internet division, once
considered the company's crown jewel, was suffering from declining advertising
sales.
"It's not clear what the company can do to
impress Wall Street beyond announcing a major
broadband initiative or
releasing a really great earnings report," said Rob Lancaster, an analyst at
Yankee Group, a Boston research firm. And he noted the next earnings report
isn't due until summer.
Even then, analysts hold out
little hope second-quarter earnings will do much to reignite the stock.
"The company's troubles are due to its reliance on
advertising revenues and other issues related to its slow rollout of
broadband, and it's not clear when these things might improve," Lancaster
said.
AOL Time Warner executives consider a faster
Internet pipe to the home as essential to selling a slew of new products and
services such as digital music subscriptions and movie downloads. These services
could raise monthly cable bills to more than $200.
Lancaster said that regardless of the stock price, the company has
enough assets to make deals to build its
broadband subscriber base.
However, it faces other obstacles.
AOL can funnel its dial-up Internet subscribers to high-speed service
through Time Warner Cable, the nation's second-largest cable company behind the
pending combination of AT&T
Broadband and Comcast. But it will be
hard-pressed to expand its base among third-party cable customers.
Since cable operators have been signing up
broadband customers at a fairly brisk pace, they have found little
incentive to offer AOL-branded high-speed access.
"Cable operators won't need any help marketing
broadband until
they saturate the market of higher-income early adopters, and that won't be for
another few years," said Kavir Dhar, a media analyst at Jefferies & Co. "I
just don't see AOL signing any
broadband deals with any cable operators
anytime soon."
From a regulatory standpoint, there is
little pressure for competing cable operators to open up their pipes.
Last month the Federal Communications Commission voted to
classify cable-modem service as an "information service" rather than a "cable
service," meaning companies such as Comcast and Cox Communications do not have
to provide what's called "
open access" on their networks.
In short, analysts said it's tough to predict when the
stock that sold for more than $50 as recently as last June might see a
rebound.
"I think the stock will wallow for some time
before going back up," said Tom Wolzien, an analyst at Sanford C. Bernstein.
"The company's just plain out of favor with Wall Street
right now."
GRAPHIC: Graphic:
TRACKING THE STOCK: Analysts say it's not clear what AOL Time Warner
can do to reignite its stock price. AOL Time Warner stock price from January
2001 to April 2002. / JEROME THOMPSON / STAFF
LOAD-DATE: April 30, 2002