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EDITIONS
Thursday, 24 October, 2002, 09:40 GMT 10:40 UK
AOL Time Warner to restate results
AOL's business interests
Dot.com icon America Online has overstated its results over two years, bosses of the internet firm have revealed in a statement revealing a continuing slump in ad takings.

An in-house probe ordered by parent company AOL Time Warner has found that revenues at America Online were overstated by $168m between July 2000 and the end of June this year.


Except for America Online all of our businesses are doing quite well

Richard Parsons, chief executive
AOL Time Warner, the world's largest media company, said it would restate group results to reduce underlying earnings over the two years by $97m.

The announcement came in a results statement revealing that advertising and commerce revenues to America Online almost halved between the July to September quarter last year and the same period in 2002.

And it follows continuing concerns over US accounting, implicated in the fall of Enron and turmoil at firms such as Global Crossing and WorldCom.

Official probes

AOL launched its in-house investigation after the US Justice Department (DoJ) and finance watchdogs at the Securities Exchange Commission (SEC) opened their own probes.

In July, the firm admitted that $49m in ad deals at America Online may have been improperly accounted for.

The official investigations have continued to hang over AOL Time Warner, whose empire includes the CNN news operation, the Warner Bros film and TV operations, and Time magazine.

AOL shares have fallen by 60% this year.

"I just want the SEC/DoJ behind us before buying (more AOL stock)," said Craig Nebalski at Victory Capital Management, which owns 6.5 million AOL shares.

But AOL itself said it did not foresee having to further adjust its accounts, despite the ongoing internal probe.

"We have devoted a significant amount of time and resources to our review and, based on the substantial work we have done to date, do not expect any further restatements from it," AOL chief executive Richard Parsons said.

Online slowdown

Mr Parsons added that he was "pleased" that AOL was reporting results in line with analysts expectations, despite the "declining trend in advertising" at the America Online business.

The business-to-business online ad market was particularly weak, Wednesday's statement said, showing earnings down 30% at America Online during the quarter.

And while America Online's subscriber numbers grew by 206,000 to 35.3 million, many Wall Street analysts had expected more.

But AOL's networks division, boosted by buoyant foreign sales of TV shows such as Sex and the City, saw earnings surge by 16%, while the cable division reported earnings growth of 11%.

Potter magic

The popularity of Harry Potter and the Sorcerer's Stone, Ocean's Eleven and the Lord of the Rings continued to support AOL's film unit, where earnings rose by 7%.

"Except for America Online all of our businesses are doing quite well," Mr Parsons said.

The group reported a profit of $57m for the July to September quarter, compared with a $997m loss a year before.

And AOL Time Warner reaffirmed its guidance on 2002 growth targets, reassuring investors unnerved over America Online's performance.

The statement was published after US stock markets closed on Wednesday, but AOL shares rose $0.87 to $14.40 in after hours trading.

"The stock is up because they didn't have to reduce guidance and they provided a little bit of assurance about the scope of impropriety," SoundView analyst Jordan Rohans said.

See also:

10 Sep 02 | Business
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21 Aug 02 | Business
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06 Aug 02 | Business
11 Jul 02 | Business
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