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Tuesday, 25 September, 2001, 09:52 GMT 10:52 UK
AOL cuts targets after attack
Logos of the AOL Time Warner group
AOL's range of interests could insulate it from the slowdown
AOL Time Warner has warned that slowing advertising and rising costs in the wake of 11 September's terrorist attacks mean it will miss its financial targets this year.

The media and internet giant said that sales are likely to grow only 5-7% to $37.94bn in the full year, compared to its more optimistic earlier prediction of 10.5%.

Ebitda - the company's profitability not including a range of one-off costs, interest and depreciation charges and tax - will rise about 20%, the company said, rather than the 31% it had targeted before.

The company admitted that advertising had been slow well before 11 September - a situation which led it to cut 1,200 AOL jobs in August - but that the attacks had "significantly compounded" its predicament.

No surprise

The move hardly came as a surprise to the investment community.

The previous forecasts had been in force ever since AOL, the largest online service provider in the world, merged with media giant Time Warner at the beginning of this year.

Analysts at a number of banks had already cut back their own forecasts for the group's performance to around the level the company has now confirmed.

And because AOL did not make any predictions for 2002 beyond seeing double-digit Ebitda growth, observers say they are likely to cut back forecasts for next year as well.

The company's shares were part of the dive in share prices following 11 September, but climbed 9% immediately before the profit warning as investors crept back to the market.

AOL's warning came after the markets closed, but shares fell to $31.2 from $32.5 in after hours electronic trade.

Broad spectrum

Further pressure on earnings could come from the extra money the company said it was putting into newsgathering - particularly the CNN international TV news channel, the NY1 cable station in New York, and Time magazine and AOL itself, as a result of the demand for news following the attacks.

Even so, the company insisted that the broad spread of magazines, internet services, and broadcasting properties it encompasses should insulate it from the worst of the slowdown.

Subscriptions to publications and internet services should hold up well, it said, as well as the music and film business - although the immediate response to the attacks by consumers has been to cut back on discretionary spending on such consumer goods.

"The bottom line is - despite this tragedy and the resulting economic effects - our unique mix of assets gives us confidence that we can generate strong earnings growth next year and into the future," Steve Case, the company's chairman and former boss of AOL, said in a statement.

See also:

22 Aug 01 | Business
AOL cuts 1,200 jobs
25 Jul 01 | Business
AOL snaps up IPC magazines
30 Apr 01 | Business
AOL seeks UK cable alliance
16 Apr 01 | Business
AOL surfs past 29m subscribers
24 Jan 01 | Entertainment
BBC warned over magazine trails
12 Jan 01 | Business
Giant of the world
01 Jul 01 | Business
Global ad industry hits buffers
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