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News > Technology
AOL beats profit target
July 18, 2001: 11:34 a.m. ET

Shares fall as revenue misses forecast amid sluggish advertising sales
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NEW YORK (CNNfn) - Media and Internet conglomerate AOL Time Warner said Wednesday cash from operations increased more than forecast in the second quarter, but weaker-than-expected revenue and an executive's comment on future revenue growth sent the stock sharply lower.

Shares of AOL Time Warner (AOL: down $4.80 to $44.65, Research, Estimates), the New York-based owner of CNNfn, lost nearly 10 percent in morning trading.

The company reported it earned 32 cents per share on a cash basis, excluding taxes and amortization and special charges. Analysts had forecast 28 cents a share on that basis.

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The company posted cash earnings of 23 cents a diluted share on a pro forma basis a year earlier, which combines results from America Online and the former Time Warner even though the merger of the two companies did not occur until January.

Total revenue rose 3.3 percent to $9.2 billion from $8.9 billion the two companies took in during the year-earlier quarter. That fell short of the $9.7 billion forecast of First Call for the latest period.

First Call's forecast for full-year revenue for the company is $40.5 billion. But Mike Kelly, the company's chief financial officer, hedged on the company's previous guidance of annual revenue of $40 billion during a conference call, saying it would be at the top end of an expected range due to a sluggish ad market.

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graphicCNNfn's Fred Katayama takes a look at AOL Time Warner's scorecard.
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Analysts said concerns over the revenue softness were the reason for the stock's decline in the face of better than expected cash earnings.

"The company missed at the revenue line and reported what you would characterize as a messy quarter, which is not altogether unexpected due to the economic environment," Wit/Soundview analyst Jordan Rohan told Reuters. "Nobody is immune to broader economic trends."

Including all charges and costs, the company reported a second-quarter net loss of $734 million, or 17 cents a share, down from a loss of $927 million, or 22 cents a share, a year earlier.

The AOL Internet unit's operating profit climbed 37 percent while revenue increased 13 percent. Networks, filmed entertainment and cable operations also saw profit growth in the teens in the period, although the  profit from music fell by nearly a third.

Subscription revenue rose 10 percent to $4.1 billion, while advertising and commerce revenue edged up 1 percent to $2.3 billion. Revenue from content fell 4 percent to $2.9 billion, as declines in music and publishing revenue overcame a gain in movie sales.

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The company also announced an agreement with telecom WorldCom (WCOM: Research, Estimates) to advertise several of its brand, including MCI long-distance service, across the media company's various platforms, including Time Inc. publications, Time Warner Cable and the Turner Broadcasting System. Financial details of the agreement were not disclosed, but the company described it as a multi-year, multimillion-dollar agreement.

Shares of AOL Time Warner (AOL: Research, Estimates) gained 9 cents to $49.45 Tuesday. graphic


-- from staff and wire reports

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