Time Warner Revenues Up, Despite AOL

America Online’s ad revenues rose by $333 million in 2005, a gain that was once again dwarfed by losses in subscriptions to the AOL service.

Full-year revenues at AOL dipped 5 percent to $8.3 billion, resulting from a 10-percent, $722 million decrease in subscription revenues. The subscription dip was partially offset by a 33-percent, $333 million increase in advertising revenues. Ad revenues for the year were buoyed by a $162 million increase from Advertising.com; a 35-percent, $116 million rise in paid search; and an increase in traditional advertising. Fourth quarter revenues for AOL slipped 8 percent from the year before, down $171 million to $2.0 billion.

The AOL service lost 625,000 U.S. members in the quarter, and 2.8 million throughout 2005, ending the year with 19.5 million U.S. members. In Europe, the AOL service ended the year with 6.0 million members, a decrease of 108,000 from the previous quarter and 287,000 from last year’s quarter. Time Warner Cable added 265,000 residential high-speed Internet subscribers in the quarter. AOL has recently been making an effort to hold onto subscribers switching to broadband. It signed deals with BellSouth, Time Warner Cable and Verizon, and launched a national ad campaign promoting broadband plus AOL.

Time Warner reported overall net income of $1.4 billion for the fourth quarter, or 29 cents a share, up from $1.1 billion, or 24 cents a share, in the year-ago quarter. Revenue for the quarter rose 7 percent to $11.9 billion. Revenues for the fourth quarter were up from the same period of 2004 in all segments except the AOL unit, with the largest increase coming in the cable television and high-speed networks segments.

“2005 was a very good year for the company and its owners, but with one glaring and frustrating exception: our current stock price,” said Dick Parsons, Time Warner’s chairman and CEO. “The media industry overall has traded down over the past year, largely because of concerns about its long-term growth prospects. I can’t speak for the entire industry but I can tell you that from Time Warner’s perspective we are very confident about the health of our company over the short and longer terms.”

Time Warner stock opened the day trading at $17.53, in the middle of its 52-week range of $16.10 to $19.00. Parsons said during the call that the company’s stock is undervalued, and so Time Warner will accelerate its stock buyback plan over the next three months to capitalize on the current price.

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