Disclosures

AOL Inc.

I, Sameet Sinha , certify that this report reflects my personal beliefs about this company and that no portion of my compensation was, is or will be directly or indirectly related to the specific recommendations or views discussed in this report.

Disclosure

  • B. Riley & Co., LLC does and seeks to do business with companies covered in its research reports.
  • A portion of this analyst’s compensation is based on the sales, trading and investment banking activities of B. Riley & Co., LLC.
Disclosure Chart

Ratings Distribution as of May 17, 2012 % with Investment Banking Relationships
Rating Number of Companies Percent of Total Rating Number of Companies Percent of Total
Buy 112 73.7% Buy 13 100.0%
Neutral 37 24.3% Neutral 0 0.0%
Sell 3 2.0% Sell 0 0.0%
Total 152 100% Total 13 100%

Explanation of B. Riley & Co. LLC's Rating System

  • Buy: We generally expect "Buy" rated stocks to materially outperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly attractive.
  • Neutral: We generally believe "Neutral" rated stocks will perform roughly in line with the S&P 500 and Russell 2000 over the intermediate and long term.
  • Sell: We generally expect "Sell" rated stocks to materially underperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly unattractive.

Risks and Considerations

  • Acquisition/Integration - The Company recently completed acquisition(s). If the Company fails to successfully integrate the acquisition, the deal may lead to disappointing returns.
  • Competition - The industry is highly competitive and many of the Company's competitors have greater resources.
  • Cyclical Nature of the Company's Business - Revenue from the Company's businesses have historically correlated positively with both US and world GDP. A cyclical downturn in GDP growth domestically and/or abroad may lead to a material deterioration in the Company's results.
  • Economy - Macro-economic issues such as increasing oil and gas prices and a possible drop in consumer spending could have a negative impact on the Company's business.
  • Execution - Management may not execute well on its restructuring efforts as it allocates capital and human resources towards acquisitions and related integration, possibly resulting in lower margins and cash flow.
  • Growth Plan - There are many factors that may impact the company's ability to achieve its stated growth objectives.
  • Industry Change - The industry is subject to rapid technological change.
  • Loss of Key Personnel - In our opinion, the current management team will be instrumental in executing the Company's growth strategy. The resignation of a key member of management would have a negative impact on the Company.
  • Further Potential Risks - See the Company's SEC filings, particularly its 10-K filing, for a discussion of further potential risks.

Additional Risks and Considerations

     

     

     

     

    • Dependence on a third-party search provider - The Company does not own or control a search service, and is not able to package and sell search advertising along with display advertising services outstide AOL Properties.  As search advertising represents a significant portion of online advertising spending, the company's lack of a proprietary search service could adversely affect its ability to maintain and increase advertising revenues.
      • Reliance on legacy technology infrastructure - Significant portions of its content, products and services are dependent on technology infrastructure that was developed a number of years ago.  Competitors with newer technology may have greater flexibility and be in a position to respond more quickly than the Company to new opportunities.
      • Subscriber decline - Access service subscriber base could decline faster than the Company aniticipates.