Internet and media powerhouse AOL Time Warner Inc. (AOLTW) reported wider losses for the fourth quarter of 2001 Wednesday, citing continued weakness in the economy and a sluggish advertising market. The company also predicted that revenue will continue to be flat in the first quarter of 2002.
The results held few surprises, however, given that the company issued revised earnings expectations on Jan. 7, as it continued to beat the drum of economic anguish prompted by the advertising slump.
AOLTW posted a net loss of US$1.8 billion for the quarter, or $0.41 per share. This compares to a loss of $1.1 billion, or $0.25 cents a share in the year-earlier quarter.
Results for the fourth-quarter and full-year 2001 were adjusted to normalize the effects of the merger of America Online Inc. and Time Warner Inc., and to include charges and investment portfolio declines, the company said.
Revenue for the quarter ended Dec. 31, 2001, rose 4 percent to $10.6 billion, compared to revenue of $10.2 billion in the fourth-quarter of 2000, in line with revenue predictions made by analysts polled by Thomson Financial/First Call.
Fourth-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) grew 14 percent to $2.8 billion, compared to $2.4 billion in the same quarter of 2000.
Fourth-quarter cash earnings came in at $0.33 per share, compared to $0.28 per share in the fourth quarter of the previous year, marking an 18 percent increase, AOLTW said. The cash earnings per share were on target with analyst consensus estimates.
For the full-year 2001, AOLTW reported a net loss of $4.9 billion, or $1.11 per share compared to a net loss of $4.4 billion, or $1.02 per share for the full-year 2000.
Revenue for 2001 rose 6 percent to $38.2 billion, compared to $36.2 billion in the previous year.
EBITDA for 2001 was $9.9 billion, 18 percent higher than the previous year’s figure of $8.4 billion. Cash earnings per share for the full-year 2001 came in at $1.18, a 26 percent increase over earnings per share of $0.94 for 2000.
Additionally, the company predicted that revenue and EBITDA for the first quarter of 2002 would be “essentially flat” due to continuing economic woes.
Looking past the doom and gloom of the advertising market, AOLTW executives emphasized their bright expectations for the company’s broadband business during a conference call with analysts Wednesday.
“No other company is better positioned to both drive and capitalize on this emerging opportunity,” said AOLTW Chief Executive Officer (CEO) Gerald Levin.
Time Warner Cable Inc. is the number-one provider of broadband directly to the home and AOL is the number-one ISP used over broadband, Levin said. The CEO predicted that the company’s wide subscriber base, wealth of content and expanding cable network will prove a successful combination in the emerging broadband market.
Especially advantageous is AOLTW’s subscriber base. The company added 6.5 million new AOL subscribers during 2001, bringing its total AOL membership to 33.2 million. Time Warner Cable added 471,000 digital subscribers in the fourth quarter to finish the year with 3.3 million subscribers.
Overall, AOLTW’s total subscriptions, including its cable, media and ISP business, totaled 148 million, an increase of 17.9 million over 2000.
The company is hoping that these subscribers will give it a competitive edge when it comes to snatching up the broadband market.
“We will be intensely focused on the build out of broadband,” said AOLTW Co-Chief Operating Officer (COO) Richard Parsons, who is due to replace Levin as CEO in May. “We know that this is where the game is going to be played,” he added.
Parsons also gave some guidance as to how he expects to run the company once he takes over as CEO.
Saying he wanted to establish credibility and respect, Parsons encouraged the analysts who cover his company to let AOLTW know if they think the company is not being managed in a sound and transparent form.
“If you see us managing our company in a way that falls short of the highest standards of American industry, let us know,” Parsons said.
The plea was an apparent reaction to the recent implosion of energy trading company Enron Corp., whose dodgy accounting practices served to cast a shadow of doubt on the veracity of all corporate financial reporting.
Giving further insight into his leadership style, Parsons also told analysts that he would focus on long-term goals, as opposed to the quarter-to-quarter scrutiny companies have recently been subject to.
Looking ahead, the company’s reaffirmed its previous guidance for 2002, predicting 5 percent to 8 percent growth rate for the year, with 2002 EBITDA growth of 8 percent to 12 percent.
The company’s stock (AOL) dropped 7.98 percent to $24.57 Wednesday after the results were released.