AOL, free from Time Warner, posts 4Q profit despite slide in subscriber, advertising revenue

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Newly independent AOL posts 4Q profit

NEW YORK — AOL Inc., newly released from its fizzled marriage with Time Warner Inc., reported a profit for the fourth quarter on Wednesday, reversing a year-ago loss brought on by huge accounting charges even as revenue fell.

Display advertising helped fuel the quarter’s results even as the company’s subscriber base dwindled, as did search revenue.

AOL, which runs dozens of Web sites and a shrinking dial-up Internet access business, officially split off from media conglomerate Time Warner Inc. on Dec. 10.

That ended a disastrous corporate union that began when AOL — then known as America Online — acquired the media conglomerate at the height of the dot-com boom in 2001.

On Wednesday, Chairman and CEO Tim Armstrong said AOL is now a “leaner and more nimble organization,” having laid off more than a third of its staff as it prepared to separate from Time Warner.

Armstrong told analysts in a conference call AOL may “experience a dampening of momentum” over the short term. But, he added, the company is “not focused on quarter-over-quarter results,” but on how AOL becomes a “valuable property on the Internet.”

“AOL is not a quarterly project,” he said. Plans for 2010 include growing advertising, as well as the scale of local communities AOL serves.

AOL rose to fame in the 1990s with its legacy dial-up Internet access business, but began to decline after hitting a subscriber high in 2002 as faster broadband Internet connections gained popularity.

For the past several years, the company has been trying to reinvent itself as a content and advertising business. AOL now operates a variety of Web sites, include the popular tech blog Engadget, personal finance site WalletPop and food site Slashfood. But the transition has not been easy, as advertising revenue hasn’t been able to offset the drop in dial-up revenue. While AOL’s U.S. subscriber count dropped 27 percent to about 5 million in the most recent quarter, ad sales fell 8 percent.

By comparison, Google Inc., the online advertising leader, reported fourth-quarter Internet ad growth, while rival Yahoo Inc. reported a smaller drop in revenue than in the first nine months of the year and projected modest growth in the first quarter. Microsoft Corp. said its Web search and advertising business’ loss widened in the fourth quarter, due to declines in display advertising revenue.

AOL said Wednesday it earned $1.4 million, or a penny per share, in the last three months of 2009. That contrasts with a loss of almost $2 billion, or $18.52 per share, a year earlier, which included $2.2 billion worth of one-time charges.

Stripping out restructuring and other unusual expenses from the most recent quarter, AOL earned 71 cents per share. On average, analysts expected 63 cents per share, according to Thomson Reuters.

Revenue fell 17 percent to $809.7 million but topped the average forecast of $763.5 million.

AOL shares rose 33 cents, or 1.3 percent, to $24.98 in morning trading.