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AOL's profit falls, ad revenue still weak
AOL, whose shares tumbled 13 percent in late morning trading, making it the biggest percentage loss leader of the New York Stock Exchange, is going through a sales reorganization that will continue to affect the company
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By Jennifer Sa
Thursday
April 29, 2010
NEW YORK, USA: AOL Inc's shares plunged on Wednesday as it reported lower-than-expected first-quarter revenue and it warned advertising sales would remain under pressure through the rest of the year.
AOL, whose shares tumbled 13 percent in late morning trading, making it the biggest percentage loss leader of the New York Stock Exchange, is going through a sales reorganization that will continue to affect the company.
AOL Chief Executive Tim Armstrong told investors and analysts during an earnings call: "We are not happy with the overall lag in the ad market. But we are very happy with the decision the company is making for the future."
Advertising revenue in the first quarter plummeted 19 percent to $354.3 million on weakness in display and search.
AOL revamped its sales team following last year's split with former parent Time Warner Inc, handing 80 percent of its sales representatives new accounts. Armstrong said on the call that AOL is retraining its sales force to better serve clients, a process that will take three to six months.
Miller Tabak & Co analyst David Joyce said executives did not offer any surprises on the call. AOL warned in the fourth quarter of 2009 that the restructuring under new management would cause disruptions into 2010.
"The market has a short-term memory," he said.
Credit Suisse analyst John Blackledge said in a research note that, while AOL's overall results were better than expected, display advertising should "continue to underperform the market," while search declines will "continue for the next few years."
On the search front, Armstrong said AOL is close to signing a new search partnership deal in the summer or early fall.
The company said domestic AOL subscribers to its Internet access service fell 26 percent, while subscription revenue decreased 28 percent to $282.7 million year to year.
Overall, AOL's earnings fell to $34.7 million, or 32 cents per share, from $82.7 million, or 78 cents per share, in the same quarter last year.
Excluding items, AOL earnings per share were 86 cents versus analysts' expectations of 70 cents per share, according to Thomson Reuters I/B/E/S.
Total revenue declined 23 percent to $664.3 million. Analysts had expected the company to report revenue of $679 million, according to Thomson Reuters I/B/E/S.
The company also said it sold its instant- messaging service, ICQ, to Digital Sky Technologies Ltd for $187.5 million and that it is pursuing a sale of social networking site Bebo.
AOL's shares were down 13.3 percent, or $3.73, at $24.28 in afternoon trading on the New York Stock Exchange.
©Reuters
http://www.ciol.com/Global-News/Global-News/News-Reports/AOLs-profit-falls-ad-revenue-still-weak/135557/0/
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