Our take on today’s news and analysis:
Barclays Initiates On AOL And Sees Upside
Doug Anmuth initiates with a $30 Price Target – 29% above the current price:
“Around the time when AOL began to trade in the when-issued market, investors were concerned about the degree of page views and advertising revenue generated by Access subscribers. Since then AOL management has clarified that the vast majority of traffic is coming from non-paying users.
As of 3Q09 AOL had 5.4 million Access subscribers while unique visitors trended close to 100 million per month according to comScore. Even at 2+ screen names per account we would not expect Access subscribers to account for more than 20% of overall traffic and page views.“
Our Take: We agree. We continue to believe improving the company’s email business is central to any successful turnaround at AOL. In addition, we believe the company has the opportunity to retain a lot of this valuable email traffic by improving its email product. Management has taken initial steps in the right direction but there is a lot of heavy lifting to be done.
Credit Suisse Sees 3 MM To 11 MM Google Nexus One Sales In Year OneTelecom analyst Jonathan Chaplin does not release official estimates for sales of a potential Google Nexus One phone, but does give a range that indicates he believes it could potentially sell:
“The iPhone sold about 5.4MM units in its first year and 6.6MM units in its second year, while consensus estimates for the Droid are for about 0.9MM unit sales for 4Q (3.6MM annualized). Both of these devices were sold by a single carrier that accounts for roughly a third of the market and we would regard a range of 3 – 5MM unit sales as the upper bound for an extremely successful device that is launched with one carrier.
It is difficult to know how much greater sales would be if the device were available at all carriers simultaneously – the addressable base would be larger; however, the carriers may not promote a device as heavily without the benefit of exclusivity. In addition, sales will be reduced if the device is not subsidized in some way.
The 2.5-10% of sales used above implies unit sales of 2.8MM – 11.4MM, which seems reasonable to us. We would note however, that this is not an official estimate, but rather a range of possible sales, which enables us to do further analysis on the implications to wireless carriers.”
Our Take: Regardless of how the Phone sells, Google’s Android strategy is working. The company is taking a page out of Microsoft’s book–spraying software across a large number of hardware providers–and Android should soon begin to challenge RIM and Apple in smartphones. The fact that Google is selling a phone directly is an odd departure from this strategy, one that could create major conflict with its hardware partners.
Apple Moves A Step Closer To Killing The TV Business (WSJ)
According to the WSJ Apple is in material talks with CBS and Disney to cut licensing deals for its cable killer Apple TV in which subscriptions would be delivered to the TV over the Internet:
“The proposed service by the maker of iPhones and iPod music players could, in at least some scenarios, offer access to some TV shows from a selection of major U.S. television networks for a monthly fee, according to people familiar with the discussions. Apple is pushing to complete licensing deals and hopes to introduce the service in 2010, some of those people said.
Apple faces an uphill battle assembling a critical mass of TV networks to sign up, a factor that could delay or scuttle a launch. A broad swath of media companies—including News Corp., Viacom Inc., Time Warner’s Turner Broadcasting and Discovery Communications Inc.—appear to be opposed to or leaning away from signing on, at least to Apple’s initial proposals, according to people familiar with the matter. It is unclear if NBC Universal, in which Comcast is buying a controlling stake, is interested.”
Our Take: Internet TV services like Hulu or the proposed Apple TV service are clearly threats to cable TV operators. However, cable companies are so far facing this challenge with their “TV Everywhere” services, which offer a deep programming selection from most of the networks on cable TV – but only for cable subscribers.
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