AOL 1Q profit slumps as ads, subscriptions wane

April 28, 2010 By RACHEL METZ , AP Technology Writer

(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 costs, led to a 58 percent drop in first-quarter net profit.

AOL shares sank $3.61, or 13 percent, to $24.40 in afternoon trading.

The company, which separated from Time Warner Inc. last year, earned $34.7 million, or 32 cents per share. This compares with $82.7 million, or 78 cents per share, in the year-ago quarter.

Revenue fell 23 percent to $664.3 million, missing analyst estimates for $679 million, according to Thomson Reuters.

AOL struggled in both its traditional business and its newer ones. Its long-declining dial-up Internet service revenue fell 28 percent to $282.7 million, while its fell 19 percent to $354.3 million. The ad shortfalls came in both "display" ads, which include graphical online billboards, and search ads.

AOL's results mark a sharp contrast from those of competitors Inc. and Yahoo Inc., which indicated the online advertising market was emerging from a slump that lasted much of last year. Google's first-quarter revenue rose 23 percent, and Yahoo Inc.'s first-quarter revenue rose 1 percent.

During an interview, CEO Tim Armstrong said the problems in advertising were "100 percent" due to AOL's staff cuts and other changes AOL made, including a reorganization of its domestic ad staff.

The company cut about a third of its employees, or about 2,300 of its 6,900 workers, through a combination of and buyouts during the first three months of the year. The cuts leave AOL at less than a quarter of the size it was at its peak in 2004, when its staff numbered more than 20,000.

"I'm pleased with the results from Q1," Armstrong said. "I would obviously love to have more ad , but based on what we did it's what was expected and I think we were clear that was going to happen before the quarter."

AOL also said Wednesday that it agreed to sell its ICQ instant messaging business for $187.5 million in cash to Russian Internet investor Digital Sky Technologies Ltd., which also owns a small stake in Facebook. ICQ has mostly been popular outside the U.S. in places where AOL doesn't have a big presence, Armstrong said during a conference call with financial analysts.

The company said earlier this month that it plans to sell or close its social networking site Bebo, about two years after spending $850 million to acquire it. Chief Financial Officer Artie Minson said the company expects to have a sale or shutdown of Bebo "wrapped up" by the end of May.

Explore further: Newly single AOL posts 4Q profit, despite ad drop


Related Stories

Newly single AOL posts 4Q profit, despite ad drop

February 3, 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 finally regains independence from Time Warner

December 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 sells ICQ instant messaging to Russia's DST

April 28, 2010

AOL said Wednesday it has sold ICQ, the top instant messaging service in Russia, to Russian Internet company Digital Sky Technologies Limited (DST) for 187.5 million dollars.

AOL CEO turns down $1.5M 2009 bonus

February 3, 2010

(AP) -- AOL Inc. CEO Tim Armstrong has turned down a bonus of at least $1.5 million in 2009, the company reported in a filing Tuesday.

AOL names yet another head of online ad business

May 1, 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

Top takeaways from Consumers Electronics Show

January 13, 2018

The 2018 Consumer Electronics Show, which concluded Friday in Las Vegas, drew some 4,000 exhibitors from dozens of countries and more than 170,000 attendees, showcased some of the latest from the technology world.

Finnish firm detects new Intel security flaw

January 12, 2018

A new security flaw has been found in Intel hardware which could enable hackers to access corporate laptops remotely, Finnish cybersecurity specialist F-Secure said on Friday.


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.