Wednesday, September 30, 2009

Waxing nostaligic, over America Online (TWX, GOOG))

JP Morgan analyst Imran Khan estimates that Time Warner (TWX) subsidiary America Online is worth about $4.2billion, down 24% since January, when Google (GOOG) valued it at $5.5billion.



Another gorgeous chart from AlphaNinja:









Looking back on that original deal:



And the craziness of the time, exemplified by the CEO's in an interview with Jim Lehrer:

JIM LEHRER: Speaking of euphoria, let me read you the lead in today's Financial Times. It says, " Wall Street" - it's from a story about this - "Wall Street knocked $30 billion from the combined stock market value of America Online and Time Warner yesterday as Monday's euphoria over news of the world's biggest merger departed, leaving behind a notable hangover." No hangover with you?

GERALD LEVIN: Absolutely not. This is a question of understanding the way the markets operate. And you normally have some dislocation with a deal of this size, so that there is a shuffling of shareholders; there's what's called arbitrage activities; and there's a lot of trading activity. And I'll use the word "trading" because it's not fundamental. It's not fundamental. As a matter of fact, if you look at some of the - or listen to some of the analysis, you're basically hearing this is a good deal, it makes a lot of sense, and then you go through what I'll call financial pyrotechnics, and that's what's going to happen.

JIM LEHRER: But $30 billion is a lot of money, Mr. Case.

STEVE CASE: Well, sure it is, and we do believe we're on the path of building what may be the most valuable company and most respected company in the world someday, and we're going to continue to focus on making that happen. But we can't focus on what happens in the stock market one day or one week or one month, or even one year. We've really got to take a long-term view of this, and we certainly watched our valuation as an Internet company bounce all over the place. We've seen our valuation go up $100 billion in six months and then drop $100 billion. So you can't really focus on the stock market, which can get a little bit of a roller coaster.

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