Doubt over CompuServe

COMPUSERVE, the Internet-linked company which last week announced plans for a float, may not be the spectacular stock market success that some brokers have predicted, a report suggests.

The announcement on Tuesday that the online information service is to be spun off by its owner, H & R Block, sent frissons of excitement through Wall Street. Analysts said CompuServe could be another Netscape - the Internet software provider that was floated last August, and instantly had a market capitalisation of $2.4bn, even though it had yet to make a bean.

But a report from a technical consultancy suggests it is rash to put CompuServe in the same category. Forrester Research of Cambridge, Mass, says that far from riding the Internet boom, "proprietary services" such as CompuServe could be overwhelmed by it. "They have hung in there, but their position appears increasingly precarious."

CompuServe was born in the mid-Eighties when H & R Block - a "tax preparation" company that helped citizens cope with the Internal Revenue Service - started using its spare computer capacity to store information. By connecting their computers to a telephone line, CompuServe enabled subscribers to send electronic mail, take part in discussions on everything from knitting to nuclear power, look up railway timetables ... maybe even find a husband or wife.

The online service's problem, the report says, is that the information it provides is also held on the World Wide Web - part of the Internet that can display text, graphics, photographs and video. Anyone with an Internet subscription (typically costing pounds 10 to pounds 15 a month) can get unlimited access to the Web. CompuServe charges pounds 6.95 a month for limited use but heavy users find their bills soaring.