‘Firing on All Cylinders’ Helps AOL Triple Results
America Online Inc., the world’s leading Internet service provider, beat Wall Street’s third-quarter earnings estimates Tuesday as subscribers continued to sign up in record numbers.
Dulles, Va.-based AOL posted earnings of $117 million, or 11 cents per diluted share, in the quarter, beating Wall Street forecasts by 2 cents a share and nearly tripling its 4 cents-a-share earnings in the same period last year.
“We really were firing on all cylinders. We expect to see that continue in future quarters. Clearly, the Internet is coming of age and AOL is demonstrating its leadership in the sector,” AOL Chairman Steve Case said.
AOL’s Internet service, which exceeded 17 million members in April, added a record 1.8 million members in the quarter. About 3.2 million new subscribers to AOL and its sister CompuServe services came from outside the U.S.
The company also boasted 32 million registered users on its popular instant communication and chat service, ICQ, and 15 million registered users of its recently acquired Netscape Netcenter.
AOL beat analysts’ earnings estimates for a sixth straight quarter on a record $1.25 billion in revenue compared with $757 million in last year’s third quarter.
Advertising and e-commerce revenue, a key benchmark of Internet business performance, rose 119% to $210 million, and subscription revenue was up 50% to $869 million, AOL said.
“There are very few players in this space that can grow like AOL and have a solid string of” profit, said FAC Equities analyst Jeff Sadler, who rates AOL a “buy.” Shares of America Online fell $9 to close at $153 on the New York Stock Exchange. It released results after the close of U.S. markets.
In the quarter, AOL had a pretax gain of $567 million from the sale of Excite Inc. shares, and a pretax charge of $103 million for costs related to its purchase of Netscape Communications in March.
Analyst estimates for the most recent quarter are for AOL alone, without Netscape’s results.
AOL said its net income including Netscape’s results, the Excite gain and Netscape charge was $420 million, or 33 cents a share, compared with a pro forma loss of $78 million, or 8 cents a share, in the year-ago quarter. Its profit including Netscape, but excluding the gain and charge, was $109 million, or 9 cents a share.
