While the industry buzzes with rumours of a potential marriage between America Online and Compuserve, the world?s number one and number two online service providers - analysts have been pointing out possible snags in the merger.
Some believe an acquisition based on a stock swap would be destructive for AOL, tinkering as it is on the verge of profitability, while others believe the contrasting styles of AOL and Compuserve could present a problem.
For, AOL, a merger could provide access to Compuserve?s European networks and help relieve the pileups that have plagued the service since it introduced flat-rate pricing last December. However analysts have questioned how valuable the Compuserve network is. According to Krasilovsky at Arlen Communications the network is due for a costly upgrade, and an unwillingness to make that substantial investment may be the reason that H&R Block who have an eighty percent share of Compuserve is looking to sell.
Industry watchers have also pointed out that there is little in the way of similarity between content on the two services which may make it difficult to merge the two subscriber bases. Compuserve which offers extensive news databases is oriented to business customers and techies while AOL?s service is aimed firmly at the consumer with ?chat rooms? and entertainment services.
The rumours of an AOL/Compuserve buyout began circulating this week following a statement issued by Compuserve on Thursday which said that the company was ?currently engaged in external discussions regarding a possible business combination...? The acquistion would add 5.3 million subscribers to AOL?s 8 million members and would help the two companies fend off competition from the Microsoft Network, the third-largest online service.
In a separate announcement Bruce Bond CEO of ANS Communications AOL?s networking arm has suggested that the subsidiary could be spun off as an intial public offering. He said the company was positioning itself to go public and would become more visible this year after announcing partnerships with major industry players such as the regional Bells, Hewlett-Packard and Nortel.
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