By Julian Goldsmith, 23 December 1998 00:20
NEWS America Online (AOL), the world's largest Internet service provider (ISP) has reached a market value of $50bn - exceeding that placed on multinationals like Boeing and American Express. However its profits - calculated at $155m at the end of the fiscal year 1998 - are tiny compared to those of more traditional companies of similar size. AOL's share price jumped after it announced a software bundling deal with Dell Computer on Monday. The deal involves pre-installing AOL 4.0 Internet access software on Dell Dimension and Inspiron PCs. The share price rise indicates the unflagging interest investors have shown in Internet companies - regardless of their profitability. David Yockelson, vice president and director at the Meta Group in the US, said: "Yahoo, Amazon, eBay - all these companies have a market capitalisation that is unbelievable. Amazon.com's capitalisation exceeds major stores, but with no profit. That is the way the wacky investor world has evolved." Yockelson predicts that there could be rough times ahead for these companies if the demand for IT should slacken. "As spending in technology in general declines, technology shares won't be so sexy," he said. "AOL stocks are usually bought by institutional investors, but other Internet company shares are bought by people caught up in the craze of technology."
In order to post a comment you need to be registered and logged in.
Log in or create your silicon.com account below