AOL is rumoured to be preparing a bid for rival online service CompuServe, sending shares of both skywards yesterday. Shares of AOL were up seven per cent yesterday while those of CompuServe were up 17 per cent in total for Monday and Tuesday.
AOL has about eight million subscribers mostly in the consumer sector, and CompuServe 5.3 million with the emphasis on business. Adding credence to the rumour, CompuServe owner H&R Block recently said it would consider bids for the online service.
PCDN Comment: There is plenty of the 'synergy' so beloved by acquisition watchers here. Both have spotty recent financial records and CompuServe is particularly strong in Europe where AOL is pushing hard. Both face a battle to bolster their US market share in the face of MSN's muscle and lowball pricing on the part of vanilla ISPs. Against that, it is unclear how subscribers would react to a conflation of the pair. If, in the event of a merger, CompuServe subscribers were asked to move to AOL's service, what would prevent them choosing another service instead?