According to The Wall Street Journal, AOL Time Warner's
United Online's NetZero and Juno brands have succeeded through a combination of low prices and high throughput. The company boasts of year-over-year revenue growth of 312%, 37%, 45%, and 46% for the last four quarters, as well as six straight quarters of positive free cash flow (FCF).
Investors have noticed and bid the shares up to 34 times enterprise value(EV)/EBITDA and 22 times EV/FCF, for a gain of 200% through yesterday's $30.92 close from the 52-week low of $10.74.
America Online's $23.95 dial-up service has shed 2 million subscribers for the year through June 30, while United Online gained 840,000 (Rex Moore provided the update). Not only does America Online face low-priced dial-up competition, but both SBC Communications
This latest move may be a necessary survival strategy for America Online, which has massive brand equity. But time will tell whether the commoditization of access will leave anyone making money.
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