How do you cover this in one recap when you are perhaps the only public portfolio in America that owns both these companies?!
I guess you get right down to it, on a day when the Rule Breaker Port rose 4.43% versus gains in the S&P 500, NOW 50, and Nasdaq of 1.12%, 2.37%, and 4.30%, respectively.
So first, America Online (NYSE: AOL). If you only gave me one sentence to express my feelings about the proposed AOL-Time Warner merger, I would put it thus:
Time Warner shareholders should be hopping up sprightly and clicking their fricking heels.
(Which is the title of the recap tonight.)
Here you have a company with too many brands spread out across all media, at a time when it's eminently clear that a single brand tightly focused on the one Medium to End All Media -- the Internet -- is the best way to build out a business. Which is what AOL had been doing, and what Yahoo! continues to do very effectively.
Some of my best friends are at Time Warner. I have one of their Lost Civilizations Time-Life books, which my own wife helped to research and write. (Not sure whether it ever went to video!) I might even buy two dogs one day and name them Time and Warner.
But all of this said, I have never been a shareholder of the company, and most significant Internet brands have far outperformed Time Warner in the 1990s.
I'm interested by this story, which suggests among other things that institutional investors will now need to "rethink" how they invest in the Internet. The story says that the lines are blurring so far as the Internet being a distinct medium and a distinct investing opportunity. It points out that the "stock deal could reduce the need for specialized Internet funds by highlighting the increasing exposure of traditional media companies to the Internet universe."
I agree. In fact, Rule Breaker readers and investors have heard this before, and (I hope) internalized it in their own thinking. The Internet is a technology, not an industry. "Internet indices," whether just an index or an index fund, will look comical to an observer 10 years from now looking back to today. In my September 7 recap, Consolidate to Dominate (reacting to the CBS-Viacom merger and pointing out that we're going to be seeing more and more larger and larger mergers -- witness today!), I wrote:
"We're just a few inevitable steps from a world in which most video is put out over the Internet, as the Internet merges with -- really, subsumes -- all other forms of media. Most text (print) will be done and seen online, most radio will be done online, most TV will be done online, most movies will be done online, most communication will occur online, et cetera. The geographical barriers that once justified having a fresh set of network stations in most middle-sized-to-large American cities are no longer present. Thanks to the Internet's reach, geography is increasingly irrelevant, and the barriers are breaking down."
The whole notion of an "Internet index," an "Internet index fund," "Internet stocks" and the Internet as an industry will inevitably lose meaning as more of the mainstream media and, eventually, the public at large come to realize this.
Meanwhile, AOL and Time Warner are merging. Hmph. AOL was a Rule Breaker when we bought it in 1994. In recent years, my brother has been calling it a Rule Maker. However, as this interesting posting from the Rule Maker message board (where they use Tom's unique rating system covered in Rule Breakers, Rule Makers) makes clear, AOL is now neither a Rule Breaker nor a Rule Maker. It's a huge, huge merged company managing numerous, redundant media resources within each significant medium. Just one example: It's a company that has TBS, TNT, CNN, CNNfn, CNNsi, and HBO, and now something called AOL TV, among other video assets. It's becoming increasingly difficult to study or understand.
And with $18 billion in debt and $2 million in cash, it looks more like Disney than ever before. In fact, Disney is now certainly the clearest present rival to AOL Time Warner.
If this latest mega-merger is passed, there's one thing we can say for AOL Time Warner: It still has AOL -- the most likable thing about the new company. Time Warner should be clicking its fricking heels!
(On a side note, fans of our brand-new Motley Fool NOW 50 Index, the 50 most relevant companies of our time, may be interested to learn that both AOL and Time Warner are in the NOW 50. Which means that if this merger goes through, for the first time ever we will need to select a company to replace another NOW 50 entry. Let us know on the NOW 50 message board which one you'd like to see.)
I was trying to quote my shares of Celera (NYSE: CRA) throughout the day today, but our Motley Fool quotes & data page is so overloaded by customer use (I'm figuring a fair number of us were trying to quote AOL and CRA, alone) that it pretty much didn't work throughout the day. I'd like to apologize to anyone who tried to use our quotes today and failed. We're adding more and more Web server hardware to ramp up during this period of unprecedented growth. It's rather overwhelming!... and quite frustrating when things don't work. Suffice it to say that there will be some Fools in HQ throughout the night as we work to fix those problems.
Why was I trying to quote Celera? Because today the company announced that it had sequenced 90% of the human genome, and would have the entire project completed this summer. That means that by this summer, Celera will have fully vetted the code of life, preparing itself for a few decades of additional work with other biotech partners to develop personalized therapies (genetic and otherwise) to help you and me live longer and better. The stock went bananas, up another $55 1/16, meaning we have now tripled our money since our December 17 investment. Celera and biotechnology (when you add in Amgen) are an increasingly large part of our portfolio (now approximately 20% of assets), which is very much in keeping with my thinking set forth December 22 in Revolutions and Rule Breakers: The Coming Biotech Era.
I wish I had more space to write about all of today's events, but we'll have ample time in the future to look further at the impact of both the largest merger ever and the imminent completion of what I consider to be the single greatest and most profound scientific achievement of all time.
When you own relevant stocks, you often find yourself with too little time and space and too much to say. Perhaps we'll have more time to talk about it tomorrow on CNN's "In the Money."
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