Company's current stock value at lower levels than before the merger; analysts start dumping.

Found on Newsbytes, Washington Post is reporting that the merger between America Online and Time Warner Turner Networks last year may not have been such a good idea after all, and that analysts are starting to question why they ever thought it would be.

The reason AOL isn't growing as fast is that 60 percent of American homes are already hooked up to the Internet. That means the number of potential new customers for AOL is shrinking every day. No-frills services like Erols are undercutting AOL's $23.90 a month price. Microsoft Network is becoming more competitive with AOL in attracting customers who want not only a connection to the Internet but also a user-friendly home on the Web.

AOL's also dumping more money into advertising and marketing than ever before. Some would say that they're working harder than ever to try and steal their competitors' customers, but I have to wonder if there's not a secondary motive, in trying to boost the advertising market by pumping it full of their own money. CNN can't be making too much in ad revenues these days, as it seems that nearly one in three ads are for America Online.

Even furthermore, AOL's merger was supposed to bring cable modems to the masses, as the then-over-25-million subscriber base would be transitioned to the fastest access available, proving that AOL was worth its salt. AOL has yet to make even a remote shred of good on this promise, however, and it's turning back to haunt them.

Fast connections cost $40 to $50 a month or more. AOL offers some high-speed connections and gives discounts to customers who hook up via cable or DSL instead of dialing in to its computers. But many people who go to high-speed Internet are deciding they no longer want to pay even more money for AOL.

And let's not forget the Instant Messaging debacle. As part of this partnership, AOL was (eventually) supposed to bring videoconferencing and other communications ability to AOL Instant Messenger, but when the Federal Trade Commission ruled that AIM would have to be opened up for that to happen, AOL obviously elected to sit on their haunches, rather than launch what would have been a doomed service anyway.

I really can't see how AIM can progress any further, other than fleshing out some of its newer features, bringing the chat logging from v4.4 back, and adding skinning to its interface (a la Trillian). In fact, when I see ads for AT&T's mLife, I have to wonder if it'll ever be anything more than a cellphone with already-widespread SMS features, and AIM built-in. Feh...A Handspring Treo can already do wireless AIM (And a heck of a lot better than this unwieldy thing), and there are already apps for PCs and pocket PCs that can execute SMS messages.

I've got two words for AOL in this case - Blood and turnips. You can't squeeze much harder than they are already. Crunch time is coming for AOL, and they're gonna have to figure out new ways to be profitable, or the world's biggest Internet Service Provider will soon be going the way of Kmart.