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I'll be the first to post to here.

America Online has been pretty strong through a weak quarter for technology stocks. (That follows a very weak period for it during a strong year -- 1996 -- for technology stocks.!

I am amused by a financial newsletter's suggestion yesterday that AOL may offer to buy Compuserve. Anybody else see any real point to this? I don't see enough of one... especially not for $1 billion.

Was AOL ever about to buy Prodigy... at ANY point? Would that EVER have been a good move?

Great to have Fool message boards on the Web. Hope we all enjoy them.

David Gardner, Fool
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Unlike Prodigy, Compuserve is an international service. AOL is set to enter the online market here (Japan) in the next couple of weeks. If AOL does buy Compuserve they would gain access to over two million Niftyserve subscribers (Japanese users of Compuserve). That might really help them jump start their service.

The Japanese market is in a period of flux now with NTT lowering the rates it charges for dedicated lines and entering the online service themselves (much like AT&T did). Also Microsoft is making a push here with the Microsoft Network. Finally the little regional providers are about to have their lunch eaten (IMO).

So AOL might benefit *here* if they acquire Compuserve, as a very large marketing campaign would be needed to crack open this already saturated market. Also, Japan's online growth rate exceeds that of the US (playing catch-up). So long term this promises to be a very valuable market.

Also doesn't Compuserve own their network outright? And I seem to remember reading (hearing) that all of our Visa and Mastercard transactions are carried over their lines for verification. If so, these points might work to AOL's advantage...more dial up capacity (immediately) and steady income.

Food for thought,

Lawrence
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Here is one scenario below via Cyberstocks.com

Forgive the cut and paste... Note they will make any purchase if it happens with Stock - Digesting/converting/integrating all theses folks will ding earnings with a big charge. Longer term it is a positive - Shorter term neutral to negative IMHO. Investor would once again have to keep the faith in a future payoff. Read the below and decide for yourselves please....

Trader


In the last couple of days, CompuServe stock has risen on rumors of a takeover bid from America Online. Shortly after CompuServe spokeswoman Gail Whitcomb stated that "there's nothing going on," the company admitted that it was, indeed, negotiating to sell the company.

Given that CompuServe has been soliciting offers, it would be odd if AOL had not at least considered buying the #2 online service. Recent reports indicate that there is no deal yet and that the buyer and seller have not agreed on price. Valuing CompuServe is a tricky business.

CompuServe consists of two major operations, the online service and a network services division. The online service, while #1 in Europe, is in serious trouble domestically and is bleeding red ink profusely. But the network services business, accounting for about one-third of corporate revenue, is profitable and growing at about 30% annually. Back-of-the-envelope calculations indicate that the network services business alone could be worth $10 per share.

Before takeover rumors pushed up the stock, CompuServe shares were selling below 10,indicating that investors placed a zero or negative value on the online service as an on-going business.

To maximize shareholder (mostly H&R Block) value, CompuServe needs to find a buyer of either the online service or the whole company. The only way for CompuServe to get a valuation of more than zero for its online service is to sell it as a strategic asset rather than as a viable business. There are a very limited number of companies that could view CompuServe as a strategic asset. America Online is one of them, perhaps the only one with any real interest. So, it is possible that AOL is offering a very low price. AOL has always been willing to spend heavily to attract subscribers, and it's possible that it would be willing to spend as much as $200-$300 million for CompuServe's subscriber base. That would translate to about $3 per share and would imply a takeover price in the $13 range. CompuServe may not like the price, but it may be the only offer it will receive.

If AOL were to acquire CompuServe, it would get a solid network, 3 million subscribers, worldwide dominance in the online services industry, and a host of headaches. It would likely attempt to move CompuServe subscribers to AOL, losing many in the process. It would have to endure heavy losses in the transition, and would have to try to work out new agreements with many of CompuServe's content providers, and could well lose some important ones. Perhaps most important, AOL would have to devote a great deal of management attention to the merger at a time when it needs to focus on its own operational issues. AOL, always a magnet for lawyers trying to break into the growth industry of Internet law, would certainly come under antitrust scrutiny if it attempted to buy CompuServe.

In recent years, AOL has proven more adept at the master strategic stroke than at nuts-and-bolts management and, in that respect, a bid for CompuServe would be consistent
with its M.O. The deal would certainly be done with stock, enabling AOL to expand its network and gain subscribers without laying out any cash. Profitability would, once again, take a back seat to growth as AOL management would again ask investors to look to the future for the big
payoff.

Copyright © 1997, Hoover's, Inc., Austin, Texas
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This is the same Compuserve that AOL has been operating for some time, right?  See the quote from their own web page (filter: "America Online, Inc. operates Compuserve") below.  Am I missing something?

Who We Are
Founded in 1985, America Online, Inc., based in Dulles, Virginia, is the world's leader in interactive services, Web brands, Internet technologies, and e-commerce services. America Online, Inc. operates: two worldwide Internet services, America Online, with more than 18 million members, and CompuServe, with more than 2 million members; several leading Internet brands including ICQ, AOL Instant Messenger and Digital City, Inc.; the Netscape Netcenter and AOL.COM portals; and the Netscape Navigator and Communicator browsers; and AOL MovieFone, the nation's largest movie listing guide and ticketing service. Through its strategic alliance with Sun Microsystems, the Company develops and offers businesses operating in the Net Economy easy-to-deploy, end-to-end e-commerce and enterprise solutions under the alliance iPlanet brand. Under Chairman and CEO Steve Case and Chief Operating Officer Bob Pittman, America Online -- the world's first $2-billion multi-brand new media company -- has taken a leadership role in developing the new interactive medium and will continue to do so into the future. 

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dantelope replied to message #1, the first EVER on the AOL board (from April, 1997)

<<< This is the same Compuserve that AOL has been operating for some time, right? >>>

Yes, it is/was. AOL now owns Compuserve.

Note that in Post #1, David Gardner doesn't appear to think that buying CSRV is a good idea. Funny how AOL turned it into gold! (IMHO)

What else can AOL turn into gold?
--Callisto2
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callisto2 in post #22086.....



This is the same Compuserve that AOL has been operating for some time, right?


<<<Yes, it is/was. AOL now owns Compuserve.

Note that in Post #1, David Gardner doesn't appear to think that buying CSRV is a good idea. Funny how AOL turned it into gold! (IMHO)

What else can AOL turn into gold?>>>


------------------------------------------------


Callisto2,

An outstanding question! :)

May I suggest CMGI! But I seriously doubt David Wetherell (sp?) would be keen on the idea. Still, CMGI has a lot of companies that would make a great fit with AOL as they grow 'our' business! Just MHO, of course. Thanks for a great post, Callisto2! :)

My*Kismet

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I just really wanted to reply to David Gardner's first post. It's pretty incredible how far the Fool has come. If only he (David) knew he would eventually be TMFSpiffyPop!
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