~~~~ INTERVIEW-AOL CEO sees momentum as Q3 beats Street ~~~~
NEW YORK, May 6 (Reuters) - America Online Inc. (AOL - news) produced its first no-excuses, positive earnings surprise in reporting its third-quarter results and Chief Executive Officer Steve Case said Wednesday the company continues to gallop ahead.
''We continue to see strong overall momentum,'' Case told Reuters in a phone interview after completing a quarterly conference call with analysts.
While he did not offer specific guidance for the quarter ending in June, he noted that the company will begin competing more vigorously for Internet visitors with Yahoo Inc. (YHOO - news), Netscape Communications Corp. (NSCP - news) and Microsoft (MSFT - news) by launching a new Web gateway this summer.
He made the comments after the company reported operating earnings of 16 cents per share, significantly ahead of the 12 cent a share consensus that Wall Street analysts had been expecting, according to First Call.
Robertson Stephens analyst Keith Benjamin said the report for AOL's third quarter, which ended March 31, represented the first time AOL had produced a straightforward earnings surprise without resorting to clever accounting.
''This is a new era for AOL,'' Benjamin said, as he predicted more such earnings surprises. ''I believe this is the first step toward future displays of more significant earnings leverage going forward.''
The analyst, who maintains a strong buy rating on the stock, pounded the table for emphasis after the conference call with AOL officials. He said he planned to boost his estimates for the company's fourth quarter, which will end in June, by ''a few pennies.''
''It is not too late to buy this stock,'' Benjamin said. ''Earnings and price targets can still go up. There is a big prize for first place on the Web and AOL is showing how big that prize can be.''
The heady results, reported late Wednesday, helped push shares of the world's leading online service to $88 in after-hours trading from $85-7/8 at the close of regular trading. AOL stock has more than doubled since November.
Revenues for the latest quarter rose 54 percent over the 1997 March quarter to a record $693.6 million. While subscriber access fees continued to account for the bulk of that figure, advertising and electronic commerce revenues -- on which the company has hitched its future growth hopes -- nearly doubled to $118 million from $69 million in the year ago quarter.
The executive said earnings were helped by a sharp reduction in marketing costs during the latest quarter, falling to $84.2 million, or 12.1 percent of revenues, from the 1997 third quarter's costs of $92.8 million or 20.6 percent of revenues.
Besides reporting financial results, AOL also announced Wednesday that it had acquired NetChannel Inc., creators of a service that delivers Internet access via television sets, and a rival of WebTV, a similar service owned by Microsoft.
NetChannel, which claimed 10,000 members, had shut down its service on May 3. The company's 60 employees will join AOL. Financial terms of the deal were not disclosed.
Case said the acquisition provides AOL with technology and engineering talent to prepare for the day when the Internet reaches a mass audience through television sets.
''Our strategy is to build a mass market for interactive services,'' the executive said. ''In the long run, (the market) will be using many access devices. (This deal) allows us to accelerate our entry into the television space.''
But asked whether the company planned to reintroduce the service in time for the 1998 Christmas holiday buying season, Case declined to say.
''I don't think we are ready to make any product announcements. Those will come later,'' he said.
By the end of March, AOL's cash swelled to $924.1 million from $518.2 million at the end of 1997. The company said $214.3 million in cash was generated from operations and $207.4 million in cash was received from CompuServe and other acquisitions that closed in January.
Case, who is also the company's chairman and founder, said the nearly $1 billion in available cash gives the company additional flexibility to make continued acquisitions and investments. But he added quickly that, ''just because we have cash doesn't mean we are going to rush out and spend it.''
|
