AOL--AOL earnings slightly beat expectations
By Jim Hu
Staff Writer, CNET News.com
October 18, 2000, 1:50 p.m. PT
update Internet giant America Online reported quarterly earnings that slightly beat Wall Street expectations.
The Internet bellwether, which is in the process of merging with Time Warner, posted net income of 14 cents per share. That slightly exceeded Wall Street expectations of 13 cents a share, according to a survey by First Call/Thomson Financial.
In addition, AOL posted revenue of $2 billion for the quarter, compared with $1.5 billion during the same period last year.
In regular trading, AOL shares gained $3.31, or nearly 8 percent, to $46.91. Earlier in the day the shares dipped to a 52-week low of $37.
Jordan Rohan, an analyst at Wit SoundView, said AOL met most expectations for the quarter. However, some signs of slowdown may be evident, he said.
AOL's revenue backlog, or deferred payments from long-term advertising deals, remained flat. Rohan noted that this deferred revenue slightly slipped from the previous quarter.
"That means renegotiations have taken place with AOL's advertisers, and it further confirms views of the continued weakness of online advertising," Rohan said.
Rohan added that he will pay close attention to the post-earnings conference call with AOL executives to find out if the slowing in deferred revenue slowdown is seasonal or a "macroeconomic" change.
AOL's earnings come as Wall Street begins to look more critically at whether the slowdown in dot-com advertising will affect Internet heavyweights. Strong advertising revenue has allowed many companies to routinely post double-digit growth, which helped keep their stock prices at lofty levels.
But widespread fear about a pullback in dot-com advertising has replaced that optimism and helped pulled the rug out from under the shares of many companies. Investors are looking for sure signs that Internet companies can supplement the dot-com slowdown with revenues from traditional companies sheltered from the market downturn.
Last week, Web portal Yahoo reported earnings that slightly exceeded expectations. However, Yahoo's stock took a beating on concerns that advertising slowdown could affect future growth.
Before the stock markets soured in April, Web start-ups flush with venture capital often signed multiyear, multimillion-dollar deals with highly trafficked Internet companies such as AOL and Yahoo. Since money has dried up and anxious investors are closing their wallets, Web start-ups are re-examining those lucrative deals.
The first instance of this occurred in March when health care Web site Drkoop.com revealed it was short on cash, which led AOL and Disney's Go.com to take a stake in the company in exchange for the lost revenue.
If more of these deals go sour, AOL's revenue backlog could grow, crimping revenue growth in future quarters.
Meanwhile, AOL is on track to merge with media giant Time Warner. The proposed merger recently gained European regulatory approval, and the company is awaiting a green light from U.S. regulators.
Final approval from the Federal Trade Commission and the Federal Communications Commission is expected later this month or in early November. Obtaining the necessary approvals has been more difficult than expected.
Concerned with the massive size and influence of the combination, regulators have taken a close look at the deal and may require concessions before granting approval. Among the issues is whether the merged company will allow competitors access to its cable or instant messaging networks.
Competitors such as Walt Disney have also asked for assurances that the combined AOL Time Warner will not discriminate against rival content providers on its cable systems and interactive TV services. |
