July 07, 1995
America Online stock was buoyed this week by the company announcement that its subscriber count had reached 3 million, a little more than a month after the company had announced that it had 2.5 million subscribers.
At the same time, Goldman Sachs upgraded its price targets for the stock, to $75 to $80 for the year. Goldman Sachs analyst Michael Parek, however, could not be contacted for this article. We are given to understand that the report contains impressive detail on the valuation of America Online's subsidiaries. Parek apparently states that America Online underpaid for its spate of recent acquisitions; this opinion explains why the Mr. Parek has a very aggressive valuation compared to most of his peers, such as J.P. Morgan's price target of $58 on the stock announced on May 1st.
The week, however, began on Monday with America Online subsidiary ANS taking some of the stage, reporting a pact with MCI Communications and Sprint to interconnect their Internet networks for direct exchange of traffic. As traffic is currently routed through a number of different providers, this agreement will shorten the path information takes for any of the participants.
Also, America Online announced that in its continuing reorganization around markets and customers rather than technologies and products, it had dissolved its Internet Services division. David Cole, who had headed up the Internet Services division, will take the reins of the New Enterprises division.
Lastly, to give a sense of the revenue possibilities still untapped at America Online, Business Week reported that it had given the State of Ohio a place in its forum for $10,000, giving the state the equivalent of 40 screens to tell companies why it is such a great place to do business.