AOL's Heart-Bursting Sentimentality Tempered With Fear

All the good news and yet leeriness lingers over potential growth of AOL Time Warner.
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Bob Pittman

handed

Steve Case

a fresh hanky and we were off.

Wednesday

America Online

(AOL)

bragged about a record quarter. It beat the Street by a penny with 9 cents a share earnings, or $224 million. It added 1.8 million subscribers to break the 20-million-subscriber figure for the flagship AOL service.

Step back, touch myself.

As he wrapped up the earnings conference call with analysts and media, AOL CEO Case let the emotions waft over him. Though his voice was typically flat and firm, Case was obviously basking in the brightness of the end of his era. "Thanks for joining us for the ending of a terrific quarter, in a terrific year that ends a wonderful decade."

Rank it above puppy calendars on the

Ziggy scale.

AOL president and obvious hooker-upper in the

Time Warner

(TWX)

deal, Bob Pittman, couldn't pack enough hyperbole around the numbers, the subscriber growth, the aggressive partnering and the hi-diddly-ho-ness of the whole announcement. Pittman brazenly applauded the quarter's "exceptional results." He was awed by AOL's "utterly powerful momentum."

AOL is a "big pioneer" poised for "dramatic and dynamic growth." Pittman gave an education to the Wall Street analysts on their private lines and the great unwashed listening in on the Webcast. He talked about AOL's future Internet effect on Time Warner in terms of the great technology revolutions. Think about the opportunity the CD gave to the music industry and cable's effect on the television industry. Make that "limitless potential" and the "hallmark of a global revolution." In fact, oh gentle reader, AOL's Internet-based infrastructure will have "electrifying effects on Time Warner's content business."

My name is Bob, and I'm in love with a cable addict.

But he's got the right -- better said, the privilege. He believes AOL and Time Warner's merger brings together "world-class brands" and "incredible drive." He emphasized that the 10 partnership deals done simultaneously with the finalization of the merger announcement "should give you a sense of how rich the possibilities are."

Which brings us to the second, less joyous undercurrent of the tear-jerking event: the slightest hint of rejection from AOL's acolytes. Case, Pittman and chief financial officer Mike Kelly forged ahead with steaming pile upon steaming pile of AOL accomplishments. International growth,

Spinner.com

success,

Netscape

benefits,

Gateway.net

advantages and the continued growth of

CompuServe

. What's not to like?! For starters: the biggest deal in history slowing down the Internet's No. 1 success story.

Please, don't

Lycos

(LCOS)

us. Not even a little! We mean it!

Analysts confessed their doubts. Internet bull Henry Blodget of

Merrill Lynch

worried about "incredibly difficult" megamergers. Lise Buyer with

Credit Suisse First Boston

wanted to know if different AOL service segments would prosper at the expense of others over the next year. Scott Ehrens of

Bear Stearns

wondered if AOL and Time Warner would butt heads over prime advertisers.

DLJ's

Jamie Kiggen asked if the new entity would be capable of AOL-style speed.

Case insisted the new entity will truck along with 30% growth rates. "It's clear there's lots of value to be created for our shareholders, " he stressed, dropping hefty growth names like

Cisco

(CSCO) - Get Report

and

Microsoft

(MSFT) - Get Report

as examples of his intentions for AOL. As for the specifics, AOL executives' cheek muscles cramped under the weight of perma-smiles.

What in pre-merger-news days would have been bacchanalian revelry and an analyst orgy was mired by integration fears. Despite AOL's overwhelmingly positive quarterly deliverables, the subtle stock negatives of the past week hovered. Even the upbeat Pittman offered, unprovoked, "I know partly what's on your mind is what the growth rate for the combined company will be... .

"We recognized when we announced the merger that people were pretty surprised," he explained. "We wanted to keep it pretty quiet and we succeeded. People were wowed by it. They are trying to understand it. But people will get settled down."

As long as they don't settle AOL's stock price down with them.

Tish Williams' column takes at look at the people who make Silicon Valley tick. In keeping with TSC's editorial policy, she doesn't own or short individual stocks, although she does own stock options in TheStreet.com. She also doesn't invest in hedge funds or other private investment partnerships. She waits breathlessly for your feedback at

twilliams@thestreet.com.