AOL posts higher 4Q net income but revenue slides

Feb 02, 2011 By BARBARA ORTUTAY , AP Technology Writer

(AP) -- Internet company AOL Inc. says its fourth-quarter net income grew from a year-ago period weighed down by hefty restructuring costs, but revenue fell sharply on weak advertising sales. The company sought to reassure investors that its turnaround is well on its way toward fruition and said it will start to see growth in the second half of the year.

"A year ago we were dealing with a 'sick company' and laying off 30 percent of our work force," said CEO Tim Armstrong in a conference call with analysts on Wednesday. "We have come a long way and our journey is just beginning."

AOL's plunged 29 percent during the quarter to $331.6 million. Of this, at AOL's properties fell 23 percent to $247.5 million and third-party network ad revenue tumbled 43 percent to $84.1 million as shut down European businesses and shifted focus away from lower-margin products.

Armstrong said he sees 2011 as a "comeback year" for AOL as it finishes working on its turnaround and starts expanding its ad business in the second half of the year. In an interview, he said signs that the reorganization is working include AOL's "evolving great culture," and the great talent that the company is fostering. He added that AOL has been able to increase pricing around its ads, which means demand is growing.

AOL said its for the October-December quarter totaled $66.2 million, or 61 cents per share. That's up from $1.4 million, or a penny per share, in the same quarter a year ago, when the company booked $106.3 million in expenses tied to its split from Time Warner Inc. and its efforts to shift the focus of its business.

Revenue fell 26 percent to $596 million from $806.7 million. The company attributed a big chunk of this decline to changes it is making to turn its business around, including the selling of unprofitable units, including European operations and the social network Bebo. Search and display ad revenue also declined.

Even so, AOL's results surpassed Wall Street's expectations. Analysts polled by FactSet had expected a profit of 52 cents per share and revenue of $589.7 million. Analysts had been expecting a bumpy quarter from AOL amid its reorganization, which has included acquiring new businesses, launching and relaunching websites, rolling out a new Web advertising system and laying off employees.

Less patient investors sent AOL's shares down 81 cents, or 3.4 percent, to $23.04 in midday trading.

Rivals have been faring better. Online search leader Google Inc. recently reported a 26 percent jump in fourth-quarter ad revenue, and Yahoo Inc.'s ad revenue fell 10 percent in the same period, a smaller decline than AOL's. Research firm eMarketer estimates that the U.S. online advertising market grew nearly 16 percent in the fourth quarter.

AOL had just a 5.3 percent share of the U.S. display advertising revenue in 2010, down from 6.8 percent in 2009, according to eMarketer. Facebook, meanwhile, accounted for 13.6 percent of display revenue last year, up from 7.3 percent in 2009.

AOL's subscription revenue dropped 23 percent to $235.9 million as AOL continued to lose dial-up customers who upgraded to speedier Internet service from competitors. Churn, or subscriber turnover rate, was 2.3 percent as AOL ended the quarter with 3.9 million subscribers. At its peak in 2002, AOL had 26.7 million subscribers.

For all of 2010, AOL reported a loss of $782.5 million, or $7.34 per share, on revenue of $2.42 billion. The company separated from Time Warner in November 2009. On a basis that's comparable to 2010 results, it earned $248.8 million, or $2.35 per share, on revenue of $3.25 billion in 2009.

Explore further: Why the Sony hack isn't big news in Japan

not rated yet
add to favorites email to friend print save as pdf

Related Stories

AOL 1Q profit slumps as ads, subscriptions wane

Apr 28, 2010

(AP) -- Very little went right for AOL Inc. in the first quarter as it cut way back on staff and tried to refocus its business. The Internet company said Wednesday that tumbling online advertising revenue, along with restructuring ...

AOL posts higher 3Q net income on gains, cost cuts

Nov 03, 2010

(AP) -- AOL Inc.'s profit grew in the third quarter thanks to gains on investments it sold during the quarter, but revenue declined sharply as online ad sales fell and its and its dial-up Internet access ...

Newly single AOL posts 4Q profit, despite ad drop

Feb 03, 2010

(AP) -- AOL Inc., newly released from its fizzled marriage with Time Warner Inc., reported a modest profit for the fourth quarter on Wednesday, even as revenue from online advertising continued to fall.

AOL execs, some analysts see changes taking hold

Aug 04, 2010

(AP) -- AOL Inc. reported a $1 billion-plus second-quarter loss and tumbling revenue, yet the dismal-sounding numbers appear to belie a more positive reality: The troubled Internet company is actually chugging ...

AOL finally regains independence from Time Warner

Dec 10, 2009

(AP) -- AOL resumed life as an independent Internet company Thursday as it completed its spinoff from Time Warner Inc. and closed the book on one of the most disastrous business combinations in history.

AOL names yet another head of online ad business

May 01, 2009

(AP) -- AOL, the struggling Internet unit that Time Warner Inc. is likely to spin off, said Thursday that it will put a new executive in charge of its online advertising business - making him the fourth person to hold that ...

Recommended for you

Why the Sony hack isn't big news in Japan

2 hours ago

Japan's biggest newspaper, Yomiuri Shimbun, featured a story about Sony Corp. on its website Friday. It wasn't about hacking. It was about the company's struggling tablet business.

Sony faces 4th ex-employee lawsuit over hack

7 hours ago

A former director of technology for Sony Pictures Entertainment has sued the company over the data breach that resulted in the online posting of his private financial and personal information.

Sony tells AFP it still plans movie release

8 hours ago

Sony Pictures boss Michael Lynton denied Friday the Hollywood studio has "caved" by canceling the release of "The Interview," and said it still hoped to release the controversial film.

2012 movie massacre hung over 'Interview' decision

22 hours ago

When a group claiming credit for the hacking of Sony Pictures Entertainment threated violence against theaters showing "The Interview" earlier this week, the fate of the movie's big-screen life was all but ...

Clooney slams skittish Hollywood after Sony hack

Dec 19, 2014

Film star George Clooney slammed the Hollywood movie industry for failing to stand up against the cyber threats that prompted Sony Pictures to cancel release of the movie "The Interview."

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.