AOL posts higher 3Q net income on gains, cost cuts
Wednesday, November 3, 2010; 1:53 PM
SAN FRANCISCO -- AOL Inc.'s earnings more than doubled in the third quarter thanks to gains on investments it sold, yet revenue declined sharply as online ad sales fell and its dial-up Internet access business continued to falter.
Nonetheless, the company's results seemed to give investors some reassurance that AOL is on the right track in its plans to turn its business around. Shares rose more than 6 percent in afternoon trading.
The troubled Internet company struggled even before its split from Time Warner Inc. late last year. Led by CEO Tim Armstrong, a former Google executive, AOL is trying to boost its online advertising business as subscribers steadily abandon the Internet access business that made it a household name in the 1990s.
But AOL's online ad business continued to flail in the third quarter, even as competitors such as Google and IAC/InterActiveCorp showed growth.
Armstrong said the company is working quickly to revitalize itself, but acknowledged it probably won't see the benefits of its efforts until next year.
AOL said Wednesday that it earned $171.6 million, or $1.60 per share, in the July-September quarter, up from $74 million, or 70 cents per share, a year earlier.
But much of the growth was from cost cuts and gains from the company's sale of its investments in the travel website Kayak and the instant messaging business ICQ.
AOL, which is based in New York, had shown few signs of progress in the first half of the year, though Armstrong said in August that the company has "moved the needle from 'survive' to 'thrive.'"
In a statement Wednesday, Armstrong said the company "continued on the path towards better health" through acquisitions, sales of business units, product improvements and site relaunches.
AOL's revenue dropped 26 percent to $563.5 million from $763.9 million. The latest figure was slightly above Wall Street estimates of $557 million, according to a Thomson Reuters poll.
After excluding certain one-time items, AOL earned 82 cents per share. Analysts polled by Thomson Reuters expected 47 cents per share.
Advertising revenue dropped 27 percent to $293 million. AOL attributed much of the drop to reductions in its European operations, the sale of social network Bebo in the second quarter and overall declines in search and display ad revenue. The company has been trying to shed unprofitable businesses even if they contribute to higher revenue.