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Wednesday, 17 October, 2001, 16:13 GMT 17:13 UK
Subscriptions prop up AOL results
Logos of the AOL Time Warner group
AOL's range of interests could insulate it from the slowdown
Media giant AOL Time Warner has defied the slide in advertising revenue, reporting a rise in underlying earnings over the summer.

Profits excluding one-off charges rose by 20% to $2.5bn over the July to September period, the company said, crediting its resilience largely to its huge internet and cable TV subscriber base.

US media companies have been hit by big falls in corporate ad spending this year, while the 11 September attacks led to further revenue losses as media firms opted to cancel campaigns which could be deemed as "insensitive".

AOL Time Warner's broad base of media assets, encompassing magazines such as Time, the record label hosting Madonna and one of the US's main cable networks, also helped prop up earnings.

And AOL Time Warner said it was still looking for a 20% rise in underlying earnings for 2001, with "double-digit" percentage growth next year.

Weak ad market

But including charges such as interest, depreciation and tax, and costs related to the firm's creation from AOL and Time Warner in January, the company reported a loss of $996m over the quarter.

At this point in the fourth quarter, the market for advertising revenue continues to look weak

Michael Kelly, chief financial officer

Comparative figures are complicated by AOL's acquisition of Time Warner, but the businesses lost an adjusted $902m in the same quarter a year before.

Some Wall Street analysts raised fears that AOL Time Warner will not for long be able to shrug off the advertising downturn so easily.

The group's chief financial officer, Michael Kelly, acknowledged that it shares some of these concerns, based on its assessment of the October to December period.

"At this point in the fourth quarter, the market for advertising revenue continues to look weak," said Mr Kelly.

For months, AOL Time Warner bucked the media industry trend by maintaining its financial predictions for 2001 as other media companies slashed their forecasts.

Then, in September, it confirmed that its 12-month figures would not be quite as good as it had hoped.

Wall Street caution

Wall Street media analysts gave a muted welcome to the results, which were in line with their expectations after the September profits warning.

"This was not the worst case scenario," John Corcoran of CIBC World Markets said.

"[The company] beat lowered expectations... overall, this was not a disastrous quarter".

Looking ahead, other analysts remained concerned about advertising revenue and profit margins at America Online (AOL), the group's flagship internet unit.

"We are not optimistic about a near-term recovery in AOL's ad-commerce revenue," analysts at investment bank Merrill Lynch said in a research note cutting the group's rating to "neutral" from "buy".

Paul Kim at Kaufman Brothers said: "America Online was the only real disappointment. Their margins came in a little weaker than we expected."

Another famous US media brand, the New York Times Co, has fared less well.

The firm, which owns the New York Times and Boston Globe newspapers, said the slump in earnings from advertising was behind its poor results.

Net profits fell to $43.8m for the three months from July to September, from $63m for the period a year earlier.

In late morning trade in New York, AOL Time Warner shares stood $1.75 lower at $31.75.

See also:

25 Sep 01 | Business
AOL cuts targets after attack
22 Aug 01 | Business
AOL cuts 1,200 jobs
25 Jul 01 | Business
AOL snaps up IPC magazines
01 Jul 01 | Business
Global ad industry hits buffers
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
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