AOL'S NET GAIN; DEAL GIVES ACCESS PROVIDER COMPUSERVE'S CLIENTS.

Byline: Reid Kanaley Knight-Ridder Tribune News Wire

America Online, the Internet behemoth, will gobble up the 2.6 million subscribers of the struggling No. 2 online service, CompuServe, in a complex deal that redefines what it means to be big in cyberspace.

In the transaction announced Monday, America Online and WorldCom Inc., a telecommunications company based in Jackson, Miss., said they will split CompuServe's consumer and commercial businesses once WorldCom buys CompuServe for $1.2 billion.

H&R Block, which owns 80 percent of CompuServe, has been in search of a buyer for the money-losing service for the past year. Once the deal is completed - which could take up to six months - AOL, of Dulles, Va., will command online access and the potential to advertise directly to more than a third of the estimated 30 million subscribers of online services and Internet service providers.

``They've been able to charge increasing rents for people to place their service or Web site on AOL. Having access to more eyeballs will just allow them to further increase revenues and charge more and more,'' said Jill Frankl, analyst with the market research firm International Data Corp.

``It also gets AOL closer to its goal of having 20 million (subscribers) worldwide by 2000. Obviously this deal jumps them ahead by 30 percent,'' added analyst Gary Arlen of Arlen Communications in Bethesda, Md.

America Online stock surged $6.13 Monday on the New York Stock Exchange, to $76.06 per share.

For the time being, at least, CompuServe subscribers will notice few changes as a result of the deal. ``We'll be in a `walk before we run' mode to ensure maximum customer satisfaction,'' AOL Chairman Steve Case said in an update posted on his 9-million-member service. Even after absorbing CompuServe's consumer business, Case said, ``We'll continue to operate AOL and CompuServe as separate services.''

That may come as a relief to CompuServe's loyal customers, many of whom were drawn to the venerable service, based in Columbus, Ohio, for its relatively expensive but deep databases, and hundreds of technical online discussion forums.

``If AOL is smart,'' said Arlen, ``it's not going to do very much to change that service. CompuServe probably has the most loyal customers in the online business.''

``One of the strengths of CompuServe has been the quality of its content for business and professional users,'' added Cathryn Baskin, editor of PC World, a magazine that caters to computer-proficient managers and professionals. In its own reviews, PC World has consistently rated AOL as easy to use, but CompuServe scores ``ahead in terms of the richness of information that it offers for business customers,'' said Baskin.

Still, CompuServe's days are numbered, said Robert Seidman, publisher of the electronic newsletter Seidman's Online Insider. ``Long term, I just don't see them doing that. I don't know how much sense it makes to keep two systems up and running,'' he said.

Besides, he said, ``A significant percent of the 2.6 million people have AOL accounts already. . . . If they pull a million subscribers out of it in a combination, they're doing very well.''

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