ROANOKE TIMES 
                      Copyright (c) 1997, Roanoke Times

DATE: Thursday, April 3, 1997                TAG: 9704030026
SECTION: BUSINESS                 PAGE: B8   EDITION: METRO 
DATELINE: NEW YORK 
SOURCE: ASSOCIATED PRESS

ON-LINE SERVICE FOR SALE AOL THE NEW OWNER OF COMPUSERVE? COULD BE

A combined AOL and CompuServe might be in a better position to compete with the Microsoft Network.

CompuServe's parent company confirmed Wednesday that talks were under way to sell the second-largest on-line service, sending CompuServe stock up nearly 15 percent amid reports that America Online was the bidder.

While a deal faces formidable hurdles, a combination of CompuServe and the nation's largest on-line service could create an industry behemoth - boosting AOL's 8 million membership by more than a third, erasing a big rival and aiding its ambitions to sell dramatically more on-line advertising.

A combined company also might be in a better position to compete with the Microsoft Network, the nation's third-largest on-line service, backed by the deep pockets of software giant Microsoft Corp.

H&R Block, which owns 80 percent of Columbus, Ohio-based CompuServe Inc., would not say with whom it was talking about a deal, which it described as a ``possible business combination'' between CompuServe and another party. Company representatives declined to elaborate. A spokeswoman for Dulles, Va.-based AOL said it didn't comment on rumors or speculation.

But speculation has firmly centered on AOL, whose struggle to fix its network bottlenecks could be aided by CompuServe's high-tech equipment.

CompuServe has the capacity to handle additional members with its existing modems, computers and other network equipment, said company spokesman Steve Conway. Contrasting with AOL's recent surge in members, CompuServe is beset by defections to rival services and the cancellation of its family-oriented WOW! service just seven months after it was started.

CompuServe investors applauded the merger talks. Even as the broader market tumbled, CompuServe shares soared 14.8 percent, up $1.62 1/2 to $12.62 1/2, on the Nasdaq stock market. CompuServe had gained nearly 19 percent in the previous two sessions on rumors about an AOL bid.

But analysts were mixed about a deal's value to AOL, which fell 2.5 percent to $44.62 1/2 on the New York Stock Exchange.

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