• by Masha Geller , May 30, 2003

Every so often I write something that touches a nerve with our readers and get dozens of emails back telling me I'm either right or wrong. Many of these emails make it into our Letters to the Editor newsletter every Friday, but all of them I ponder for days, sometimes reevaluating my original opinion on the issue at hand. This week I wrote that AOL would not survive if spun off from the AOL Time Warner empire, and got almost an equal number of Yeas and Nays from readers. And while I'm still holding to my opinion, I thought it might be fun to showcase a different view.

This one came from Steve Smith, President and CEO of MindShare Design in San Francisco, who sent me a bunch of charts of AOL's financials and subscriber counts and drew the following conclusion: "AOL showed an increase in EBITDA and Operating income despite their significant drop in ad and other revenue. And supposing that AOL continues to lose subscribers at the rate of 1M/year (their attrition rate for the past 6 months), they will continue to be profitable for at least 3 more years (all other things being equal), and EBITDA-positive (which typically more closely resembles cash flow) for nearly 6 years. This all assumes that all of their efforts to stop the hemorrhaging of subscribers are ineffective and that they see no COGS savings from the subscriber attrition (a conservative assumption). AOL's got a lot of options and a lot of time."

"If Mark Twain were alive he might well say that reports of AOL's death have been greatly exaggerated," Steve concluded, adding, "Not to mention the $750M shot in the arm they're getting from Microsoft..."

I submit the two views to you for consideration. Let me know what you think.