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2HRS2GO: AOL-Time Warner nod should have come sooner

3 min read

COMMENTARY -- Thursday ramblings:

  • If nothing else, today's action
  • shows how the effects of politics on the markets is vastly overstated. Broad indices are down, despite the presidential election's conclusion with a Bush victory. The market may have reached a bottom last week, but it's not ready to rise yet either, and it won't until the macroeconomic picture looks better. Not much the president can do about that.

  • Shares of America Online (NYSE: AOL) gained
  • following the Federal Trade Commission's approval of the AOL-Time Warner merger. People complain about the presidential recount taking a long time, but that was nothing compared to the amount of wrangling over this deal. It should not have taken this long to get to this point, because this merger will not fundamentally destroy competition.

    AOL has to bear much of the blame, especially given its supposedly strong contacts in Washington, D.C. Steve Case and his team knew going in that regulators would want hefty assurances about open access to the cable lines and Time Warner (NYSE: TWX) content. Had he provided them at the very beginning, this would be a done deal.

    In light of AOL's stock depression all year, shareholders have a right to ask why the companies didn't offer large concessions sooner.

  • One of the TalkBacks
  • beneath a Broadvision (Nasdaq: BVSN) downgrade story asks "Why do they (analysts) always downgrade when the company is down?"

    Because only financial columnists, gamblers and other foolish people defy trends. Analysts rarely concern themselves with trying to figure out when to sell; all they care about is when to buy. In the case of Broadvision, a downgrade is not a difficult thing to imagine, because the stock remains expensive compared to the rest of the market.

    Broadvision has been sliding all year, and considering that the stock is still valued at more than 90 times estimated earnings for the next 12 months, or a multiple more than 60 percent above that of Oracle (Nasdaq: ORCL). At that level, it's easy to see plenty of air remaining beneath BVSN's current market value.

    Maybe you can justify its valuation -- doubtful, but anything's possible -- but no one can say with certainty that Broadvision is going to start rising again. That's reason enough to be neutral on the stock.

  • Charles Schwab (NYSE: SCH) has frozen hiring
  • as a prelude to possible cost-cutting measures. I can see why online brokers are tightening the belt, but I wonder if that's such a smart thing for the biggest players.

    The downturn in online trading activity means brokers have to work harder than ever to attract customers. Is it really the time to make cost cuts that inevitably affect quality of service? Internet trading already has a bad rap for slow execution and bad customer service; reining in improvements might only serve to drive more traffic back to the traditional brokers.

  • An LA-based tracking service reports that online shopping
  • took off this week. BizRate.com estimates Internet retail sales of nearly $448 million on Monday and Tuesday combined.

    "Clearly, consumers are embracing the benefits of online shopping," BizRate.com CEO Chuck Davis declared.

    I wouldn't be so sure that this marks some kind of greater belief in the Internet so much as simply bargain hunting.

    BlueLight.com CEO Mark Goldstein a couple of weeks ago told me he has been surprised by the heavy promotions coming from competitors, particularly Amazon.com (Nasdaq: AMZN). You can find e-tailers offering deep discounts, free shipping and other moves that will take their toll on margins.

    So even if revenue has started surging, it might be coming at an unexpectedly heavy price for the retailers. At this point in the development of e-tailing, I'd rather make money. 22GO>