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Low Expectations Help AOL Beat Street

In its first earnings since the Time Warner (NYSE: TWX) spinoff, AOL (NYSE: AOL) beat analysts’ estimates with a $1.4 million profit — versus a $1.9 billion loss in Q408 — as revenues declined 17 percent — just beating the most pessimistic analyst estimates. Meanwhile ad revenue declined only 8 percent, with display in particular down a mere 3 percent. Remarking on the results, CEO Tim Armstrong, who has steered AOL to independence, noted the long road the company has in turning its fortunes around. In a statement, he said: “2009 marked the closing of an important chapter in AOL’s history and the opening of a new chapter that we are passionately pursuing. We have a clearly defined strategy, and we enter 2010 incredibly focused on day-to-day execution.”

AOL’s performance reflected a problem that has been building for a long time: the downward spiral of subscribers to its dial-up service. Subscription revenues were 307.4 million, a drop of 28 percent. AOL subscribers tend to do more searches than non-subs, and as a result, the company saw lower revenue per-search as the number of subs slid 27 percent to just under 5 million. International display fell 22 percent, dragging revenues down even further, offsetting the meager 1 percent gain in U.S. display revs.

Third party network revenues slipped just 1 percent, also reflecting lower revenue of AOL’s international operations, a situation Armstrong had warned of often during conference appearances over the past month. Furthermore, since the spinoff in early December, AOL has made a point of “de-emphasizing” the cheaper third party ad net business in favor of building up its premium display ad offerings.

The company also highlighted $107 million in restructuring costs. On an adjusted basis, AOL’s EPS was $0.71. Thomson Reuters (NYSE: TRI) analysts had been expecting $0.63 EPS on an adjusted basis.

One Response to “Low Expectations Help AOL Beat Street”

  1. Part of their problem is dealing with the UAW. Get rid of the unions and our country would do so much better.Unions were made because AMERICANS ARE SELFISH AND STUPID!!!…That stupidity and selfishness also made the unions bloated with corruption and greed. You can take the American away from the greed but you can’t take the greed out of the American!!