Jim Seymour was the guest on a Q&A on TheStreet.com's Message Boards on Jan.10 and Jan. 11. Seymour, a TSC columnist, discussed the future of the AOL-Time Warner merger and other tech-related queries. Here is the transcript.
TSC Moderator Laura Poynter:
Jim Seymour will be on the boards answering your questions shortly.
Hello, everybody. What a day in the market! I'm looking forward to your questions.
Jim, if this megamerger had occurred two weeks ago, would you have still put AOL on your "25 for 2000" list? How do you see this deal affecting AOL's stock price for the rest of the year? Thanks for your great insight.
Where can I go to get the pipe without the content?
I suspect that among the options you'll find from this AOL-Time Warner merger will be a pipe-only offering.
Jim, what are your feelings regarding AT&T after this merger? I notice that you are not long T anymore.
View, I slowly unwound my T position over the past couple of months; got rid of the last chunk last week. Did OK, overall, because my basis was low. I think T is in for a time of frustration and regulatory grief; I think the AOL-TWX deal pretty clearly is NOT good for T.
I wouldn't buy it now. Bail on an existing position? ... Depends on your time frame, but T feels like dead money for awhile to me. For me, the most interesting question involves hanging around for the existing-shareholder distribution of shares in the T media-assets tracking stock.
T has said that after offering a thin slice to the investing public, they'll spin off the rest to T holders. But they haven't talked about a time line.
Jim, I enjoy your columns immensely, three quick questions:
Does AOL+TWX make SOME (not necessarily AT&T) of ATHM's cable partners more likley to re-up on exclusivity?
Do you think the 55-45 split is equitable for AOL holders?
Is AT&T going to demand concessions for its UMG voting stake approval of this deal?
Vettester, I think that since almost all of ATHM's cable-carriage partners are also holders of ATHM equity, they'd think a long time before doing anything they thought hurtful to their own economic interests. But if the AOL-TWX combo takes off, then maybe, maybe.
I think the 55/45 deal is OK -- and in any case, it's not going to change. I'd rather have seen a 60/40 valuation, in favor of AOL holders.
The T situation with its UMG position -- which gives it a chunk of Time-Warner Cable -- is interesitng. Whether the concession is expressed publicly or not, I expect Mike Armstrong to demand his pound of flesh. (Interestingly, Case and Levin said today that an early-morning call to Armstrong was one of their first acts of the day.)
As with other megamergers in banks and industrials, such a singular merger is often a precursor to a larger trend. Jim, would you care to speculate on any similar deals in the pipeline or those that you believe should be?
Gary, I hear things about other deals, and as I said in one of my columns today, I think there is already pressure on Yahoo! to consider a tie-up -- conceivably, with GE's NBCi. But nothing definite, by any means.
What's your take on today's trading action in AOL? Tom Davis
Some confusion and uncertainty, I think. Clearly this was a kind of bail-out/cash-out for TWX holders, so they were destined to get the big pop.
I expect to see AOL start a long, long climb now, which should continue for years (with the usual market stumbles along the way). I see AOL as now being an equal of CSCO in terms of longtime power and appreciation.
AOL really has become, as
said this morning, "the stock you've ¿gotta¿ own."
Why should I buy IONN? What do they do and why are they important?
IONN, which stands for -- get it?!? -- "Eye on (your) Network" -- ho-ho -- makes network-performance-measurement.
Having said that, I'm going to keep the focus on the AOL-TWX deal in this special TheStreet.com AOL-TWX Coverage chat session today.
Jim, what effect will AOL/TWX have on WebTV?
Don't see much connection.
Jim, do you think there is any chance of a possible deal between AT&T and Yahoo!. It seems whenever theres an AOL deal, Yahoo! does a similar deal. EX. Ford & Kmart. Thanks in advance. Nate
Nate, sure it's possible. Yahoo! needs a partner too, the thinking goes. Would you rather see YHOO with T, or maybe with GE's NBCi interests, spun off as a separate company?
- Media Mogul Move over
Mel Karmazin Sumner
and all the old media guys. Steve Case will now own all the broadband, entertainment, magazine publications, film, cable, Internet, (fill in as you wish) that he wants. The biggest ISP and the biggest media company in the world are joining forces.
Well ... it may not be quite THAT big a deal, but I do agree that it's a defining moment in the history of the Web and Net, and in convergence, obviously, as well.
Jim, is there increased benefit to any of the net infrastructure plays now that cable appears to be the leader? Do you see the baby bells ramping there DSL rollouts?
Kevin, a great question, worth a lot more room than I have here. See my two-part col on how this will affect DSL vs. cable access, starting tonight and continuing tomorrow morning. ... Then let's talk about this here again tomorrow.
Jim IVOD Interactive Video on demand TWX/Roadrunner has been beta testing their systems in various markets, what is your take on IVOD and who will dominate with the technology?
Bullish4now, as I told Kevin a minute ago, see my two-parter on exactly this, tonight and tomorrow, on
Jim- should we value AOL as a traditional media company, or should we value TWX as a dot-com? Skip.
Skip, great question, which I'll promptly duck.
Seriously, I think this TWX-AOL combo is going to have the stock price and velocity of a dot-com, with the earnings -- earnings! wow! what a concept! -- of a real media company. Sounds to me like 2+5=5.
Sorry; I know that sounds cheerleaderish. But I am hopelessly bullish on this deal.
Jim -- You're the greatest - thanks for being part of
which makes it possible for me to gain the benefit of your insight. I'm not reading print articles much these days. David Yeidel
Mr. O'Yeidel, you're a shameless flatterer. Thanks for the kind words.
Jim, if we are going to be accessing the net without computers in the future does this make the server companies more important i.e. SUNW/IBM or the data-management companies i.e. EMC/NTAP?
I'd say SUNW and EMC are both indirect winners, maybe big winners, from this deal.
IVOD meat I am hungry for some meat, is this AOL/TWX deal all about interactive video on demand? I even see music being paired with video of some type in any situation. This buyout brings a video driven Internet into our homes faster, do you agree and put a little meat on that answer please.
Dear Meat-Eater: See my two-part col on this, this afternoon and tomorrow morning. ... Hint: we're thinking along the same lines.
Hi Jim, isn't this going to slow further AOL's already slowing growth rate? How quickly do you think this combined company is going to be able to grow revenue over the next five years? If grow does slow won't AOL's high PE contract? Thanks so much.
Good question. There are some obvious, but I think mistaken, comparisons between this deal and what happened to highflier Qwest after it went for stodgy, slow-growing US West last year.
Here, though, there ARE real synergies.
I think AOL's growth may slow a tad, especially during the "digestion" part of this deal, but I think the market will recognize that the returns a little further out are well worth paying up now, even if the hockey-stick curve isn't as steep as it once was for "old" AOL.
Jim (this is a reposting, hope you can answer!): I just read a Reuters article which basically says that the goodwill from the AOL/TWX merger will translate to roughly a $2/year drag on the EPS (for the next 20 years!!) for the merged company, while the EPS for the combined companies is less than $1/year for FY2000. Thus, AOL+TWX= Negative EPS ???? Your thoughts on this? Thanks in advance. Curt Davis
Curt, sorry to disappoint, but I have to look into that and think about it a bit -- no off-the-cuff response.
The ball is now in Yahoo's! court. And I think they will be hitting hard. They can't do the convergence dance (tv/pc) with out content. NBCi seems weak. How about a strategic alliance with DIS/GO? Maybe throw in T for the pipes. Seems possible. BTW thanks for excellent coverage of Linux back in 98-99, at
and Info World.
Cargo-man, thanks for the kind words. I'd say DIS and T are prime candidates for a YHOO deal ...but I hear YHOO and DIS have repeatedly waltzed around on this, and yet they've (obviously) never gotten to the altar.
Jim, I emailed you a part of the Reuters article about an hour ago. I will resend the entire thing. Please check email for this. Maybe you can chew on this and respond in a column? Thanks again. Curt Davis (Long AOL)
Thanks, Carl -- I'll take a look.
Jim this is my first chat on
, I have a huge amount of respect for your insight. Have I done something wrong here because you have not answered any of my questions. I thought there was more meat served during these chats? Any how, I will anxiously await your new article.
Actually, I answered at least two. I usually try to respond only once per "chatter," to give everyone a chance. Look back through the posts....
One more question please, does this change the outlook for communications chip stocks in anyone¿s favor? BRCM/CNXT? Or will all chips rise?
Last one: I don't think it tilts the table in comm chips at all...yet. And with that, goodnight, everyone. Let's do this again here tomorrow, same time, huh?!
TSC Moderator, Laura Poynter:
Jim Seymour will join us for part 2 of the Q&A on the AOL-Time Warner merger in a few minutes.
One question I have about this deal, and it's been bothering me all day, is this: why couldn't AOL have simply made a long-term deal with Time Warner for broadband access to its cable pipeline. That news alone would have sent shares of AOL screaming upward, and would not have altered the "new media" valuation picture. It also would have saved AOL from now having to carry such exciting properties as the TBS Superstation and Book-of-the-Month Club. A long-term strategic deal with TW (rather than this outright purchase) would have been a simpler, cheaper way to go for AOL, and it would have been cheered by investors. Instead you have stock chat boards filled with fear and loathing right now.
Hello, everyone; glad to be here. I think a deal which only brought AOL access to RoadRunner pipes on some preferred basis would have wildly sub-optimized the potential here. AOL (and TWX) took the gamble on becoming a *real* "new media" company, and the mkt is trashing AOL for that right now.
I think once the mkt understands this deal -- and yes, that may be months -- AOL will start a long, long climb. This is a LOT richer opportunity than just buying some broadband access.
Jim, Thanks for chatting with us. I made my move into AOL today @ 63 5/8. I noticed that you were not long the stock. Any reason for this and don't you think they still need to deal with ATT at some point? Thanks in advance.
Glad to be here. My PC Magazine contract keeps me from owning some stocks I'd very much like to own.... And yes, I think (as I said yesterday), Steve Case would love to do a deal w/ AT&T. May take a while for the noise and possible kulchur klashes to calm down first.
JimS Noticed you have beeb writing more for TSC. Is this a permanent thing (HOPE SO)? Just to let you know I first came to TSC in 1997 for JJC's stuff. I stay because TSC has brought in great TECH SAVY people like you. Thanx Margo Needle.
Thanks for the kind words, Margo.
My commitment to TSC is at least a column a week, and I've been averaging more like three. The five columns of the past two days rate is probably not sustainable for me, given my other obligations.
I'll leave the dozen-a-day work to Jim, who's a lot better at frequent, short, pithy cols than I am! But in general, I think you can expect to see more of me on TSC this year than last.
BTW, our megacoverage of the AOL-TWX deal yesterday and today was something we're very serious about at TSC -- throwing whatever resaources are required at big stories the instant they pop.
I cancelled two meetings and delayed a trip to be able to get these five cols out yesterday and today...and I'll do that again in a second if it's necessary. And of course there was a LOT of great stuff on TSC, besides my columns, on this deal.
Jim, Thanks for being here. Do you consider AOL a buy (for the long term) at these levels? Also, has the movement in IONN and KANA has been interesting to watch... do you still like them going forward?
If you noticed, both IONN and KANA were on my "25 Stocks for 2000" list on TSC, and I still feel very very good about both, for this year.... (Also long both, BTW.)
Jim, forgive my ignorance, but how does wireless fit into all this? Thanks for all your great pieces. Sara (long AOL)
I guess the AOL-TWX deal may accelerate the growth of wireless Net connections somewhat, just by building overall demand -- but there's already so much demand for that that I can't see them making THAT much difference.
Wireless Net connections are stuck in techno-hell right now. Metricom has what's probably the best answer RIGHT NOW, with Ricochet -- but even so, it's slooow, at a max of 128 Kbps.
The Metricom people like to say we need to reconceptualize our view of wireless Net access, to accommodate that slower delivery; I say that's nuts, in terms of big success in the mkt.
I hope to see generally available (i.e, in urban aras) 1 to 2 Mbps wireless Net access in two to three years, at best. I'd LOVE to be wrong on this...in the sense of it coming sooner!
Hi Jim, How do you compare aol merger with twx to quest and US west merger ? When will AOL stock stabilize? I am long AOL
I'm wary of the (obvious) comparisons between the two. I don't see this as an unfortunate marriage between a high-growth star and a sludgy old-time company, like that one. (In other words, not self-inflicted damage for AOL!)
I think once the mkt figures this one out, they're going to like it again...a lot. Instinct is that today's 64 close is a nice entry point for AOL. But I'm lousy at calling bottoms, so don't make too much of that!
Jim, Why aren't you telling the whole story here. DSL is old technology. VDSL (Next Level Communications-Nasdaq:NXTV) is what the RBOC will use to deliver broadband to compete with cable modems. There are no limitations with VDSL vs. DSL. US West has rolled it out in Phoenix and is getting ready to launch it in Denver and Minneapolis. All of the RBOC's are watching US West very closely. This could be the white knight the RBOC's have been looking for.
jyork69, I'm very skeptical that we'll see an early, widespread adoption of VDSL by the RBOCs. It would be great, but they're going down other paths....
do you think harmonic is a big beneficiary of the aol/twx merger. i see it was not on your 25 for 2000.
I have high hopes for HLIT, period. Remember that the "25 for 2000" list had only 25 slots...there were 50-60 stocks I'd like to have put on that list!
Thank you for finally making a statement critical of Qwest. I know it hurts to see your pride and joy fail to act as you think it should but Qwest has continuously failed in their consumer Internet ventures. When they first rolled out consumer Internet service, they forced new customers to install their version of Netscape (still do) and did not support the v.90 standard. When I switched back to Qwest for long distance recently, I visited their web site thinking they might offer a decent DSL service in my area (Washington D.C.). Residential DSL wasn't even offered!!! It has become clear over the past year that even Qwest, the one hope among the telcos, doesn't get it. If Qwest and other fails to react to the AOL Time Warner deal, it will probably be lights out. no positions
Cariloa, I should say that I repeatedly ripped Qwest mid-year, when they were going after US West. You can find those columns here in the TSC Archives....
Jim: In your discussion about DSL you failed to mention the three data CLECs currently pushing national DSL service. With the new line sharing ruling, data CLEC pricing can now be competitive for home use. I think the general feeling is for around $40 you can get 1.5 Mbps downstream with much slower upstream performance. NorthPoint (NPNT) has a deal with Tandy to begin selling residential DSL out of Tandy stores, just like PCS does for Sprint. Also, in terms of installed lined I believe the data CLECs may have as many as the RBOCs. What do you think about the data CLECs?
I intentionally didn't mention the "data CLECs," because almost w/o exception they're going after business, not residential service. (NorthPoint's an exception here.) I also think 1.5 Mpbs downstream isn't enough.
I think the synergies that fall out of the AOL-TWX union are all *consumer*-focused, synergies, and that's what I was writing about. I think the data CLECs are going to do very well, indeed.
Jim, Where is satellite broadband in your discussion? Satellite will soon (2000/2001) offer 2-way communication for the average user, it's called Ka-band. Norsat International (NSATF) is a provider of, and leader in this new technology. According to Pioneer Consulting, Ka-band multimedia satellites will provide a global, ubiquitous broadband switched infrastructure that will be available years before terrestrial infrastructure can be upgraded to comparable performance levels. Right now there are two satellites in space capable of delivering Ka-band Internet two-way access, one is operated by ASTRA-NET and the other by Koreasat. Multiple additional projects are in the pipeline. This area is set to explode in growth in the coming months. Investors are invited to visit this site for more information on satellite broadband: http://www.geocities.com/satelliteinvestor long NSATF
I want to see Ka-band satellite residential service in place, at least a little, before I jump on it. LOTS of problems.
TSC Moderator Laura Poynter:
Thanks for joining us today. We apologize for the technical difficulties. Keep an eye on the site for a transcipt of today's Q&A.