Fool Portfolio Report
Monday, September 16, 1996

by David Gardner

ALEXANDRIA, VA, September 16, 1996 -- America Online received a bright welcome from its new exchange home Monday. Amid bell-ringing and fanfare -- and in spite of a negative article on the front page of The Washington Post -- AMER rose a robust $2 1/4, or 8.4%. That move helped lead the Fool Portfolio 1.62% higher, vs. half-percent gains in our competing indices. A bloody good day.

A friend sent me an e-mail early this morning saying, "Have you seen the Post article? You come off as AOL's harshest imaginable critic!"


I read the article online at the Post site soon after, sat back, and sighed. That's life, I was reminded once again, in the old journalism world.

For the record, here are my two quotes:

"The company's growing chorus of skeptics includes the Motley Fool, the on-line personal investing adviser that rose to fame on AOL and remains an AOL shareholder despite some misgivings. 'Not only does AOL not seem cool anymore, it also doesn't seem a very healthy entity,' Motley Fool co-founder David Gardner wrote in a July report."

"AOL 'increasingly looks just like the Web: junk everywhere and more coming,' the Motley Fool's Gardner wrote in an impassioned screed. 'Slowly but consistently, our company seems to be losing its grip on what got it where it was: a good member experience,' he said. 'People want good content that is easy to find. And they're just not getting it.' "

Both of these were in fact taken verbatim from a Fool Portfolio recap ("Win a Million Dollars!" on 7/8/96) appearing in this space more than two months ago. And I stand by what I wrote: AOL has lost some of its pizzazz and ruddy financial health, it does continue to add content when I think it should be subtracting and distinguishing itself from the Web, the ultimate junkpile, and to this extent member experience has in my opinion suffered. (I was undertaking to explain why I believed subscriber churn had become so significant as to halve the company share price.)

BUT, I said a lot more too, including the key closing section which began, "You may be wondering, given what I've just written, why in heck we still own these shares." The section made it clear exactly why we do hold the shares, why we continue to believe in this company and this investment. But what occurred is that, taken out of full context, my words and my person were effectively manipulated into advocating the writer's negative point of view. That we believe enough in America Online stock to hold it (with a 300% gain in two years) is given lip service, but none of the actual rationale behind our continued bullish faith was provided. This is the old journalism model, where writers affect objectivity while selectively choosing quotations from interviewees to forward their own viewpoints or agendas. I have no particular animus for this Post writer, but I do resent being made out to be Mr. Critical.

In the online world, this journalism disappears. In The Motley Fool every day, we have conversations. Our articles and writeups don't end with the last word; they serve only as catalysts for new conversations on our message boards. Conversations build upon each other, and the "story" never really ends, until it becomes sufficiently fleshed out or eventually irrelevant.

The reason I wouldn't want to run a newspaper is that you publish once and you're done, "freezing" into immortality the few words contributed, whether in context, out of context, or somewhere in between. More importantly, you lose the ability to learn from your readers, to reflect additional viewpoints, to provide more background, to follow up in a rich and enlightening manner.

For Washington Post readers, I and America Online president Ted Leonsis ("It's mortifying to me that every day... that many people cancel AOL") and Katherine Borsecnik, vice president for content development ("Members are canceling every day in large numbers -- large enough to make a significant and material difference in the bottom line") come off as one-dimensional characters expressing a tightly focused viewpoint (the writer's viewpoint) that in many ways disagrees with our actual beliefs. Old media can do that to you, so long as it survives. But whose readers are really served... those "published at," or those who are and will always be part of the conversation?

"Much ado about nothing!" you may insist. Despite the front-page article, AMER rocked along just the same today, closing at a bid of $29. That The Washington Post would presumably like to see this company fall flat on its cyberspatial face is of no material concern, and already to be expected and factored in by discerning readers. The market responded well to AMER's new move.

KLA Instruments rose $2 to help Folly out further. No news from KLAC, which is due to release its earnings in one month. Analysts currently look for a flattish quarter, with a consensus first-quarter estimate of $0.50 earnings per share, vs. $0.52 in the September first quarter of fiscal '96. Current annual earnings estimates run $1.92 for 1997 and $2.30 for 1998, vs. $2.32 for 1996. These pessimistic outlooks leave substantial room for upside, we believe.

AT&T rose $1 1/2, staying up in the black for us with a 3% one-month return. Big T has that Dow Dividend Approach sheen to it, the hard blue glow of resolve that John Updike used to describe Boston Red Sox great Ted Williams.

Finally, Iomega dropped $1/8, higher most of the day following a new OEM announcement with Canon Computer, for standard Zips in two Canon multimedia PCs. It wasn't a big announcement, but another notch in the belt. Anyway, IOMG isn't fashionable at the moment. Fine with me. I think we'll find IOMG stock significantly higher one year from today

--- David Gardner, September 16, 1996

Today's Numbers

Day Month Year History FOOL +1.62% -0.57% 25.77% 134.84% S&P 500 +0.51% 4.91% 11.05% 49.21% NASDAQ +0.44% 4.60% 13.48% 65.78% Rec'd # Security In At Now Change 5/17/95 2010 Iomega Cor 2.52 14.38 470.67% 8/5/94 680 AmOnline 7.27 29.00 298.74% 8/11/95 125 Chevron 50.28 62.63 24.54% 8/13/96 250 3Com Corp. 46.86 52.38 11.77% 8/12/96 110 Minn M&M 65.68 69.88 6.39% 8/12/96 130 AT&T 54.96 56.75 3.25% 8/12/96 280 Gen'l Moto 51.97 49.63 -4.52% 8/24/95 130 KLA Instrm 44.71 20.50 -54.15% Rec'd # Security Cost Value Change 5/17/95 2010 Iomega Cor 5063.13 28893.75 $23830.62 8/5/94 680 AmOnline 4945.56 19720.00 $14774.44 8/11/95 125 Chevron 6285.61 7828.13 $1542.52 8/13/96 250 3Com Corp. 11714.99 13093.75 $1378.76 8/12/96 110 Minn M&M 7224.44 7686.25 $461.81 8/12/96 130 AT&T 7144.99 7377.50 $232.51 8/11/95 280 Gen'l Moto 14552.49 13895.00 -$657.49 8/24/95 130 KLA Instrm 5812.49 2665.00 -$3147.49 CASH $16258.37 TOTAL $117417.75 Transmitted: 9/16/96