Hailing the success of its ongoing integration, AOL Time Warner
(AOLTW) yesterday reported a rise in its second-quarter revenue of
3% to $9.2bn (£6.5bn), although it still reported a net loss of
$734m.
A Thompson Financial/First Call survey of analysts predicted
revenue of $9.74bn, however, and the shortcoming caused the
company's stock (AOL) to slip in early morning trading.
AOLTW, the world's largest Internet and media company, said earning
before interest, tax, depreciation and amortisation (EBITDA) for
the quarter ended 30 June, grew 20% to $2.5bn, compared to $2.1bn
for the second quarter of 2000, the company said in a statement.
The company reported diluted cash earnings per share of $0.32,
compared to $0.23 per share for the same quarter last year. That is
above the $0.28 per share predicted by 25 analysts polled by
Thomson Financial/First Call. The company defines diluted cash
earnings per share as pretax income excluding non-cash amortisation
expenses and other charges. The company reported a net loss of
$734m, or $0.17 per share, however, compared to a net loss of
$927m, or $0.22 a share a year ago.
In a conference call yesterday morning, AOLTW chief executive
officer and president Gerald Levin praised the company's ability to
maintain growth and deliver on its recent merger, "even during a
difficult business climate," adding that "permanent cost management
is a way of life" for the company.
Although the company has been hit by a worldwide economic slump,
which has resulted in a decline in advertising revenues, it claimed
it is being driven forward by marked growth in its subscriber
base.
"The heart of our business model is subscription," said
Levin.
Subscriptions surpassed 135 million in the second quarter, up 17.9
million from the second quarter of 2000. The Internet service
provider business alone added 1.3 million members worldwide,
bringing the total AOL membership to 30.1 million subscribers, the
company said.
And although AOL announced last May that it was raising the fee for
its monthly unlimited Internet access by $1.95, the increase did
not begin until 1 July, and did not come into play for its
second-quarter earnings. Levin said that he does not expect the
rate increase to affect subscription numbers.
For the third quarter, AOL will focus on growing broadband
opportunities, its AOL Anywhere wireless strategy, and the new
version of its software due to be released this quarter, AOL 7.0,
Levin said.
The company outlined AOL 7.0's features in its earnings release,
saying that the new client boasts a more localised user experience
with local content and advertising, added Mail, Buddy List and
instant messaging features, as well as broadband and narrowband
programming, You've Got Pictures 2.0, and "advancements in online
music".
In terms of music, Levin noted during the conference call that
online music service MusicNet, a joint venture between AOL Time
Warner, Bertelsmann, EMI Recorded Music and RealNetworks, would be
"up and running" in the third quarter. The company did not mention,
however, whether or not it had plans to integrate MusicNet services
into its new software.
In other financial results, AOLTW also reported revenue in
advertising and commerce of $2.3bn. And while the advertising
market itself is in a funk, AOLTW claimed to be the second-largest
advertiser in the United States during the second quarter,
underscoring the new company's ability to leverage its diversified
holdings.
As for the merger between AOL and Time Warner, completed on 11
January of this year, the company said it would cost approximately
$147bn, including transaction costs.
Looking forward, AOLTW chief financial officer and executive vice
president Michael Kelly issued guidance for the company's year-end
results, predicting revenue of $40bn, EBITDA of $11bn and earnings
per share of between $1.28 and $1.32.
And, although company executives waxed positive about the company's
second-quarter results, the fact that the company has missed
revenue expectations sent its share price down by 9.5% yesterday
morning to $44.74.
AOLTW has six primary specialties, including the world's largest
ISP AOL, its cable business, film, network and music divisions and
its publishing business, the company said.