there's something extraordinary in thee.�
I love thee; none
but thee; and thou deservest it.
-- Shakespeare, The Merry Wives of Windsor
It was love at first sight circa 1994. You were You've Got Mailing me on my seven- inch black and white Mac Classic screen, letting me correspond with cross-country friends in real time, as your chimes transformed boring work days into musical interludes. You were innovative, extraordinary, a revolutionary capturing my heart.
Running with you on the Internet was rad; you were sexy, rule-breaking, a rebel with a cause. Would you be a good long-term investment as well? Could our novel romance evolve into a romance novel? Or would you take my money and fade into oblivion like many past investments gone awry, breaking my heart and bank account?
There was nothing quite like you -- easy to use, lots of fun, and growing almost as fast as Bill Gates' net worth. With only 500,000 members in December 1993, you reached out and touched 4.5 million two Decembers later. With the trust and faith of an impassioned innocent, I took the plunge and committed my funds to you.
The course of true love never did run smooth.
-- Shakespeare, A Midsummer Night's Dream
Your 1996 growing pains put our relationship under constant stress. This time, my beloved, you took the plunge, even though each quarter produced increased revenues and earnings either meeting or beating expectations. My mother warned of a dangerous love like yours.
Moving to the NYSE on September 16th of that year gave you newfound dignity among the elders; but the price of growing to almost 8 million members by year's end didn't come cheap. In 14 days in May, you tanked 24%. And from May 8th to July 18th, you dropped 57.5%. The pressures of the new pricing plan, access issues, increased churn rate, and heavy institutional and short selling made me want to run from your arms, as your stock price deflated 11% for the year.
O judgment! thou art fled to brutish beasts,
And men have lost their reason.
-- Shakespeare, Julius Caesar
Wall Street's wise were always putting you down -- down, down, down. You were deemed unworthy by the The Wall Street Journal, Barron's, the The New York Times, and Business Week. They declared you obsolete, as the future of the online medium would become Internet-dominated. "Sell!" they warned. "Short!" they wailed. They told me you were bad; but I knew you were sad. I'm sorry they hurt you, the leader of the 'Net.
I focused on your growth, popularity, and my obsession for your service. I grabbed a Valium and decided to hold long-term, knowing that love often demands faith, trust, and appropriate medication.
During the next three years, the Wise had a change of heart, as you donned a suit and tie and became Wall Street's little darling. Growing from 8 million subscribers in January 1997 to 20 million by Y2K, you had become the blue chip of Internet stocks. Your ever-expanding international presence made the world a little smaller. During this three-year period, you bought CompuServe, Netscape, ICQ, MovieFone, and entered into countless partnerships to keep the business growing, all the while increasing revenues and earnings per share. Blossoming into an Internet Service Provider, a portal, a community, and a proprietary content provider all in one, made me very, very proud.
You grew advertising and commerce revenue related to online transactions. You continued to improve cash flow from operations as you became a high-margin business with little debt. Your loyal shareholders were rewarded. Even my mother approved (and invested).
Oh, to look at your most current quarter puts the blush back in my cheeks! Sales were up 41% to $1.6 billion, up from $1.1 billion a year ago. Advertising, commerce and other revenues increased 70% to $437 million. In the quarter, you added a record 1.8 million new members. The future looked incredibly bright. Until....
You caught me by surprise announcing a merger with debt-laden heavyweight Time Warner (NYSE: TWX). Why now, beloved? Everything was going so well. How could you abandon our dreams for the future and reinvent yourself yet again?
No one knows what the future holds for AOL Time Warner. The esteemed Gardner brothers expressed concerns about Time Warner's massive debt, widely spread asset base, and the bogging down of AOL's current growth rate. How can an eagle soar with a DC-10 strapped to its wings?
AOL's COO, Bob Pittman, believes earnings for the combined behemoth can continue to grow about 30% annually, which isn't too shabby for a company that's taking over the media world. Pittman's history of turning concepts into gold (MTV, Nickelodeon, Six Flags) inspires, especially partnering with AOL founder Steve Case, whose visions have transformed a company with 250 employees and revenues of $30 million into one with 12,000 employees and revenues of $4.7 billion.
True love requires faith and trust, while taking risks in times of change. After all these years, you're still innovative, extraordinary, a revolutionary capturing my heart. History says that you've always come through for me. I therefore will keep my love and investment dollars with you, as we enter a brave new world.
Just heed the words of the bard:
And make the earth devour her own sweet brood;
Pluck the keen teeth from the fierce tiger's jaws,
And burn the long-lived phoenix in her blood;
Make glad and sorry seasons as thou fleets,
And do whate'er thou wilt, swift-footed Time (TWX),
To the wide world and all her fading sweets;
But I forbid thee one most heinous crime:
O, carve not with thy hours my love's fair brow,
Nor draw no lines there with thine antique pen;
Him in thy course untainted do allow
For beauty's pattern to succeeding men.
Yet, do thy worst, old Time (Warner): despite thy wrong,
My love shall in my verse ever live young.
-- Shakespeare, Sonnet 19 (sort of)
On this weekend before Valentine's Day, visit our Stocks Fools Love special for many more torrid affairs of the heart. Tune in to see what happens when Fools name the public companies that they love!
