Selling everything they own will always help the bottom line.
AOL returns to profit; stock jumps<?I>
NEW YORK (CBS.MW) -- AOL Time Warner, the world's largest media company, rebounded Wednesday from the biggest quarterly loss ever to post a first-quarter profit on the strength of its movie and cable businesses.
Sales surged 6 percent in the quarter. The company reported net income of $396 million, or 9 cents a share, versus a loss of $54.24 billion, or $12.25 a share, in the year-earlier quarter.
Analysts had expected net income of 4 cents a share in the quarter, according to a Thomson First Call survey of 11 analysts.
"I'm pleased that we got off to such a strong start," said Richard Parsons, AOL's chairman and chief executive, on a conference call. "It gives us increased strength and confidence."
But Parsons said he could not offer an update on the government's investigation into the activities of the company's America Online unit.
An initial public offering of the company's cable operation is "still in our plans" and "is still moving ahead nicely," Parsons said during the conference call.
AOL Time Warner controls some of the best-known media and entertainment properties in the world. It owns the Time Inc. magazine empire, America Online, the Warner movie and music global colossus, Home Box Office and Turner Broadcasting, including CNN.
Parsons said AOL's proposed sale of half of the cable channel Comedy Central to rival Viacom was "good for both companies."
The stock rose 69 cents to $14, a 5 percent gain. The shares had been edging up in recent sessions, as investors showed renewed confidence in an AOL turnaround. AOL's stock, though, is down 30 percent over the past year.
In a statement, AOL (AOL: news, chart, profile) also reaffirmed "in its entirety" its full-year business outlook.
Revenue for the first quarter increased 6 percent over the same period in 2002 to $10 billion.
EBITDA -- or earnings before interest, taxes, depreciation and amortization -- rose 14 percent to $2 billion. Revenue increased 6 percent to $10 billion, topping the average analyst estimates compiled by Reuters Research of $1.8 billion and $9.7 billion, respectively.
In the troubled America Online unit, EBITDA jumped 18 percent, while revenue slumped 4 percent, as a decrease in advertising and other sales more than offset a rise in subscription revenue.
The post-merger AOL Time Warner has been afflicted by problem after problem with America Online. Growth has slowed, and analysts fret that the online unit's prospects are dim because it may have a hard time competing in the looming broadband technology movement.
Subscription revenue, though, climbed 10 percent in the quarter to $4.9 billion, led by growth in the company's cable and America Online businesses. Content revenue jumped 11 percent to $3.3 billion, due to increases in the film and HBO divisions. But advertising revenue declined 5 percent to $1.3 billion.
Wall Street has been skittish because the Securities and Exchange Commission is probing AOL's America Online unit for possible improper activities over the past few years. The threat of an investigation has held the stock back in recent months.
"The bears want to focus on the America Online problems, and everyone else is looking at the AOL company's cash flow," said James McGlynn, a fund manager of Summit Partners in Cincinnati, and an AOL stockholder. "I'm a bull on the company, but Wall Street is afraid of going into a stock that has an SEC investigation hanging over its head."
In response to an analyst's question, Don Logan, who is presiding over America Online, noted that the Time Inc. magazine group was similarly downtrodden a decade ago.
Logan noted that both businesses had demoralized staffs, faced charges that their subscriber business had matured and "had earnings going the wrong way." Logan said Time Inc. rebounded by sticking to basics and concentrated on improving its core business.
In an attempt to show solidarity throughout AOL's operations, Parsons was joined during the conference call by Logan and Jeffrey Bewkes, who had supervised the rise of Home Box Office and now leads AOL's entertainment operations. |
