AOL, Microsoft Profit Reports Anticipated

Wall Street’s attention this week will be focused on the flood of corporate earnings reports. Among them will be America Online Inc., the No. 1 Internet service, which has proposed to buy Time Warner Inc. AOL is expected to post higher fiscal second-quarter earnings Wednesday, helped by holiday advertising and subscriber growth. The company is forecast to earn 8 cents a share on revenue of $1.57 billion in the quarter ended Dec. 31, up from 4 cents on $1.14 billion in revenue in the year-ago period, according to First Call/Thomson Financial. First Call’s year-ago figures reflect a stock split and Netscape Communications Corp. results, which was acquired by AOL. Some Web sites that track profit estimates say America Online could earn as much as 10 to 11 cents a share.

Many investors and analysts will be more interested in details of AOL’s pending acquisition of Time Warner, the world’s largest entertainment company, than in the quarter’s results. AOL shares have dropped about 11% since the deal was announced last Monday, due in part to fears that the company’s growth rate will slow after the purchase. Analysts and investors will look for more details in a conference call Wednesday.

Meanwhile, look for software giant Microsoft Corp. on Tuesday to post strong earnings, despite its dramatic reshuffling at the top and signs that the “post-PC era” has it in a quandary. The reason for the good news: The Wintel world is still alive and kicking up strong earnings, fueled by the growth of the Internet that eventually is supposed to make Microsoft’s packaged software obsolete. Not yet though. Results next week will show strong double-digit earnings growth, with most analysts expecting a 16% to 17% gain. The consensus earnings per share forecast is 42 cents a share, up from 36 cents a year ago.

Strong results would help dispel any fears lingering after Gates handed the chief executive post to No. 2 Steve Ballmer and talked about the need to reinvent Microsoft to meet growing competition from companies such as IBM Corp. and Sun Microsystems Inc., which both report their quarterly results this week, as does Apple Computer Inc. on Wednesday.

Also look for Boeing Co., the world’s biggest plane maker, to report on Wednesday a 51% increase in fourth-quarter profit as its commercial-jet factories continue to produce planes more quickly and cheaply. Boeing’s profit from operations will rise to 68 cents a share from 45 cents a year earlier, according to the average forecast of analysts. The increase will come even as sales drop to about $15 billion from $17.1 billion. After a lengthy struggle with production bottlenecks, the commercial-jet division has rebounded, led by President Alan Mulally. The turnaround helped Boeing make its first major acquisition since 1997, agreeing last week to buy Hughes Electronics Corp.’s satellite-manufacturing businesses for $3.75 billion.