AOL Time Warner Inc. (AOLTW) reported strong second quarter results Wednesday, aided by gains in its filmed entertainment and cable units.
The New York media conglomerate said that its revenues for the quarter ended June 30 grew 6 percent to US$10.8 billion over the same quarter last year. Net income came to US$1.06 billion, or US$0.24 per share, compared to US$396 million, or US$0.09 a share for the year-ago period.
Analysts polled by Thomson First Call predicted earnings of US$0.10 a share
"It's fair to say we delivered overall a solid quarter," AOLTW Chairman and Chief Executive Officer (CEO) Richard Parsons said during a conference call Wednesday.
But while the company trumped predictions for the quarter, it also said that the U.S. Securities and Exchange Commission (SEC), which has been conducting an investigation into AOLTW's accounting practices, has recently informed it that the accounting of two transactions is not correct.
AOLTW said that it believes the transactions -- between the AOL unit and Bertelsmann A.G. -- are accurate, however.
Meanwhile, the AOL unit reported a 6 percent decrease in revenues for the second quarter due to a dried-up advertising demand, AOLTW said. Subscription revenues at AOL grew 6 percent, however, in part thanks to strong gains for AOL Europe.
AOL reported 25.3 million members in the U.S. by the end of the quarter, representing a 1.2 million decrease from the same quarter last year. The Internet unit pinned much of the loss on the removal of nonpaying members from its subscriber base.
AOL Europe members stood at 6.2 million at the end of the quarter, 238,000 more than in the year-ago period.
Parsons said that the company is betting on AOL's upcoming AOL 9.0 Optimized software to buoy the Internet division.
"We've got our fingers crossed and we are quite optimistic (about AOL 9.0)," Parsons said. The software, which is due out later this quarter, has a range of features geared for broadband use in an effort to migrate AOL's many dial-up subscribers to high speed connections.
"AOL's strategy is to move much more aggressively on broadband," Parsons said.
The company's revenue gains during the second quarter came from its film and cable units, however. AOLTW filmed entertainment revenues spiked 16 percent in the quarter, due to blockbusters like "The Matrix Reloaded," while revenues from cable subscriptions climbed 13 percent.
The company is still being dogged by the SEC probe which began last year. Upon issuing its quarterly results, AOLTW said that it may have to restate financial results related to the transactions in question. AOLTW already restated two years' worth of financial results last year due to accounting problems within the AOL unit.
Additionally, it said that "the SEC continues to investigate a range of transactions principally involving the company's America Online unit."
The results sew up a busy first half of the year for AOLTW, during which it has struggled to rise to its feet after being pummeled by a series of blows in 2002, including a management shakeup, eroding investor confidence and a plummeting share price.
So far this year, however, the company has moved to sell off non-core assets, such as its CD and DVD manufacturing and distribution business, and to boost demand for its broadband and dial-up Internet access software, adding bells and whistles while launching an aggressive marketing campaign.
Looking ahead, AOLTW said that it expects revenue to grow in the mid-single digits for full-year 2003, compared to US$41 billion in 2002, while revenue from the AOL unit will be down in the mid-single digits for the year, compared to US$9.1 billion in 2002.
Shares of the company (AOL) slid 5 percent to US$16.01 a share after the results were released Wednesday.