AOL Time Warner misses jackpot

World's biggest internet service provider and has remained strong

By BBC business reporter Martin Lewis

The bosses of AOL Time Warner are likely to show later on Monday that even the biggest of companies is not immune to the downturn in the technology and media sectors.

AOL Time Warner, created by the largest merger in corporate history on 11 January last year, is due to discuss its outlook for 2002 with analysts after the close of business on Wall Street.

And the talks are expected to confirm that investors' early predictions of double-digit earnings growth at the merged company were distinctly optimistic.

The company spans Warner Brothers films, Turner Television and the AOL internet company.

Time Warner calling the shots

AOL is the world's biggest internet service provider and has remained strong because it relies on subscriptions, not advertising.

The old traditionalists are back in charge when they looked like they were a bit out of the picture

Ashling O'Connor, Media Correspondent, Financial Times

But the downturn in the internet sector, coupled with disappointing earnings growth, has led to a shift in the balance of power at the top of the company.

"A year ago AOL the internet company was very much in the driving seat. I think a year on the stock market has taken a dive and media companies have become a bit more realistic" explained Ashling O'Connor, Media Correspondent, Financial Times.

"Now, Time Warner is taking control, there is a new chief executive, Dick Parsons, taking over from Jerry Levin, the AOL man, and suddenly the old traditionalists are back in charge when they looked like they were a bit out of the picture."

Profits overestimated after merger

Movie blockbusters

A telephone conference call with Wall Street analysts is scheduled for 2200 GMT. Many market-watchers believe the company will downgrade profit forecasts for the second time since 11 September.

The challenge now is for AOL Time Warner's media arm to ride out the advertising downturn while its internet wing converts its huge subscriber base to more lucrative broadband access.

There are signs of strength, though. The company's film arm has recently launched the movie blockbusters Harry Potter and Lord of the Rings, and while revenue growth may be slowing, earnings as yet show no sign of contracting.

And some analysts believe that by announcing an earnings downgrade, the new management team is simply taking the opportunity to get rid of all the bad news in one go.