Have to like the news.....
America Online delivers on all fronts
Net blue chip beats by 2 cents; Gateway pact unveiled
By Bambi Francisco, CBS MarketWatch
Last Update: 0:22 AM ET Oct 21, 1999 Also: NewsWatch
DULLES, Va. (CBS.MW) -- America Online, the bluest chip of the cyber world, reported better-than-expected earnings as membership across all services grew and sales from advertising and e-commerce doubled.
Today on CBS MarketWatch
European bourses pulled in two directions
Net investors rejoice with AOL's quarterly report
IBM matches Street targets but investors slice shares
Export surge shrinks U.S. trade gap
Schwab lags in Japan's online trading race
More top stories...
CBS MarketWatch Columns
Updated:
10/21/99 4:42:00 AM ET
The Dulles, Va.-based company said it earned $184 million, or 15 cents a share, for its fiscal first quarter, vs. 4 cents in the year-ago period and analysts' average expectation of 13 cents.
On the top line, AOL (AOL: news, msgs) matched estimates of $1.5 billion in sales, up 47 percent from the same period a year ago.
AOL shares finished the day at 121 but dropped to 117 1/2 on Instinet.
Sales generated from subscriptions rose 38 percent to $995 million, while higher-margin revenue categories -- which include advertising, commerce and other areas -- doubled to $350 million from $175 million a year earlier.
Membership growth in the AOL service set a record, with the service adding nearly 1.1 million new members around the world, besting at least some analyst expectations of 950,000.
Demonstrating AOL's multiple-brand strategy, CompuServe 2000, AOL's fastest-growing brand in the value segment, added 378,000 subscribers. This occurred while "our core brands" also sustained membership growth, noted AOL Chief Executive Steve Case during the conference call following the earnings release.
CompuServe's appeal stems from a rebate program whereby consumers receive $400 off certain computers with a three-year commitment to the $21.95-a-month service. AOL said it plans to keep the program in place for the time being.
Instant-messaging portals also gained in popularity and "stickiness." ICQ added 7.6 million new registered users in the quarter, bringing the total registered user base to 45 million. Of ICQ's registered users, two-thirds are based outside the United States. Not only are more consumers signing on, but they're sticking around longer. New features, such as e-mail and search capacities, helped to keep users on for at least an hour a day.
"(ICQ is) growing like a weed," said AOL President Bob Pittman. "Monetizing it" will be "relatively easy," he added.
Gateway pact
Additionally, AOL inked its first pact with Gateway (GTW: news, msgs), giving the Net giant a new distribution channel. Under the deal, AOL will invest $800 million in cash and stock over a two-year period. See related story.
The deal with Gateway will not preclude AOL from signing agreements with other companies in the so-called original-equipment-manufacturer category, executives said. Executives did not disclose the economics of the deal, though.
"Gateway was the first PC manufacturer to start its own ISP, recognizing that the Internet was a major reason why people buy (computers)," Pittman said, "and we're pleased they've decided to work with AOL to take this business to the next level."
Gateway climbed 5 1/8 Wednesday to end the day at 52.
|
