AOL Time Warner revenue rises, loss narrows

AOL Time Warner Inc. on Wednesday reported a 9 percent increase in revenue for its first quarter as the media conglomerate saw gains in subscription, advertising and content revenue. Still, the company said it will post a net loss of US$1.4 billion or $0.31 a share for the quarter ending March 31. The loss is because of merger-related expenses and pretax non-cash charges of $620 million, reflecting the write-down of certain investments in the AOL Time Warner investment portfolio, AOL Time Warner said in a statement. This year's loss compares to a loss of $1.5 billion or $0.34 a share for the same quarter last year.

Despite merger-related expenses, the recently minted media and Internet powerhouse's ability to "mitigate volatility" underscores the conglomerate's potentially titan strength, Chief Executive Officer Gerald Levin said in a conference call Wednesday morning. AOL and Time Warner merged Jan. 11, creating the world's largest media company.

"We clearly stand as the blue chip for the millennium," Levin said.

Total revenue rose 9 percent to $9.1 billion during the first quarter compared to $8.3 billion during the same time in 2000. Cash earnings per share were $0.23 a share compared to $0.19 a share for the same time last year.

Twenty analysts polled gave a consensus on cash earnings of 20 cents a share, according to First Call/Thomson Financial on Wednesday. Four analysts expected revenue for the first quarter of $9.022 billion.

The company's EBITDA (Earnings Before Interest Taxes, Depreciation and Amortization), which helps measure cash flow, grew 20 percent to $2.1 billion from $1.8 billion, AOL Time Warner said.

AOL Time Warner, meanwhile, saw its total subscription base grow to 133 million, and the company's AOL online service added 2 million new members for a total of 28.8 million, the company said. During the conference call, company executives emphasized AOL online's ability to leverage AOL Time Warner's vast media holdings, noting that it has benefitted from the online industry's overall consolidation.

"The AOL division of the AOL Time Warner is the jewel in the crown of the company," Levin said.

"I think AOL is going to have a monster year," Co-Chief Operating Officer and Director Richard Parsons added.

During the quarter, revenue from cable operations grew 12 percent to $1.6 billion. Subscription revenue increased 12 percent to $1.5 billion and advertising and commerce revenue rose 17 percent to $117 million, the company said.

As for the overall decrease in advertising spending amid the general economic slowdown, Chief Financial Officer Michael Kelly said that AOL Time Warner is "being realistic" about the decrease and has already planned for it. However, Kelly predicted that advertising revenue will pick up in the second-quarter. The company is counting on core advertising revenue from its large media partners who are expected to charge ahead with normal spending in the next quarter.

Looking ahead, Kelly predicted total revenue for the year to reach at least $40 billion and 2001 cash flow to end 200 percent over last year.

The company predicts a successful launch for its MusicNet business-to-business music streaming and downloading service in the third quarter. Given peer-to-peer music swapper Napster's experience, "it's clearly something folks want," Parsons said. AOL Time Warner is planning to envelope its service in a copyright protection system, which will avoid the Napster controversy, however.

Another area where the company foresees 2001 growth is in providing high-speed Internet access services through its cable-modem division.

Levin said that the company is in a good position given that speedy access has proven to be something people "can't live without."

AOL Time Warner released its first quarter results prior to the opening of the U.S. financial markets. By mid-morning shares of AOL Time Warner (AOL) traded up 3.86 percent to $47.76.

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