America Online (AOL) Beats the Street, Shares Rally 13%

America Online (AOL: Charts, News), the former Internet superstar that dominated dial-up services in the 1990s, released its fourth quarter earnings yesterday, posting a smaller than expected loss and a slight decrease in revenue. The company posted earnings of 23 cents per share, or $22.8 million, on revenue of $576.8 million.

Earnings per share and revenue slid 66% and 3%, respectively, from the prior year's fourth quarter. Analysts had low expectations for AOL, with a consensus estimate of 16 cents per share. While the company's earnings were still weak, the company's total revenue decline was its lowest drop in five years, which has prompted talk of a turnaround. Daily Chart
If you are not able to see the chart, your email client probably does not support javascript. To view it, please click here CEO Tim Armstrong was optimistic regarding the company's results. "AOL took a large step forward in Q4 and I am very pleased with the way we ended the year," he stated. "Our Q4 results highlight AOL's ability to methodically improve our consumer offering and financial performance. We continue to invest in AOL and will continue to improve our operations during 2012." Shares of AOL have traded in a wide 52-week range between $10.06 and $24.42. For the full year, AOL posted a 9% decline in revenue from $2.4 billion in 2010 to $2.2 billion in 2011. The company managed to slow its decline with healthy numbers from its advertising segment, which post revenue of $363.8 million, a 10% increase from the prior year quarter. In addition, revenue from display ads - such as banner and graphics-based ones - posted a strong 15% year-over-year surge. Third party network revenue across increased 20% as a result of its consistently growing network of sites. AOL has struggled to reclaim lost ground in Internet advertising, which it once dominated in the 1990s but is now the domain of search king Google (GOOG: Charts, News). By 2009, AOL was trailing Google, Yahoo (YHOO: Charts, News) and Microsoft (MSFT: Charts, News) in Internet traffic and advertising revenue. Current CEO Tim Armstrong, a former top sales executive at Google, has been drawing heavily from his experience at the leading search engine to aid AOL. Armstrong has been at the helm of the company since March 2009, and his past two years have been highlighted by a series of large acquisitions intended to update the company's aging "Internet portal" image. Last year, AOL spent 40% of its cash reserves, or $315 million, to acquire news and culture website The Huffington Post. AOL also invested over $50 million in Patch, the company's "hyper-local" news blog network, and sold its archaic chat system ICQ, an artifact of 1990s computing, for $187.5 million. Armstrong is confident in the changes, stating, "The operational and structural changes we have made over the past two years are making a difference." Despite these advances, the company still post an 8% decline in search revenue as well as a 15% loss of dial-up subscribers, which accompanied an 18% drop in subscription revenue. In addition, stagnant properties such as MapQuest and AIM continued to contribute to declines, due to the dominance of Google Maps and Facebook, respectively. These losses, however, were partially offset by gains in its Huffington Post Media Group. Although the company is showing flickers of life, AOL in 2012 is but a shadow of its former self. The company, once an Internet powerhouse, acquired Time Warner (TWX: Charts, News) in 2001 for $111 billion, a massive merger that caused severe acquisition indigestion which hurt shareholders of both companies. In late 2009, AOL was spun off by Time Warner and its shares have since dropped from an all-time high of $28.45 last April to approximately $18. Shares rallied over 13% during Wednesday intraday trading after the company announced its earnings. Other News About AOL AOL's sales still sliding, but declines are slowing AOL posts its lowest revenue decline in five years. AOL Beats The Street, Q4 Revenue Down 3 Percent To $577M A look back at AOL's earnings. Other Stocks in the News Chrysler and Ford Car Sales Improve American auto sales are on the rise again. What to expect from Facebook's IPO filing The one IPO on everyone's mind. Copyright 2011 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Feb 2, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

Posted in ...