AOL Time Warner Slides

Investors shaved the value of AOL Time Warner Inc. by 8% Wednesday after the media giant reported third-quarter results that showed signs of weakness in its key Internet and cable divisions.

Shares of AOL Time Warner slid $2.69 to close at $30.81 on the New York Stock Exchange after the company reported that its third-quarter loss widened 10.4% to $996 million. But analysts were more troubled by the company’s inability to predict how soon its revenue and profit margins would improve.

“There’s a lot of uncertainty,” said John Corcoran, a new-media analyst with CIBC World Markets in Boston. “We assume this year will be tough, but what about next year? They didn’t give much guidance.”

Revenue at the New York-based media giant grew 5.7% to $9.3 billion, up from the $8.8 billion the two companies would have recorded for the same period last year if their merger had already been complete.

In the AOL division, quarterly revenue climbed 13% to $2.2 billion as income from advertising and commerce grew 5%. Though other Internet bellwethers, such as Yahoo Inc., have reported double-digit drops in ad revenue, analysts were disappointed that AOL had such modest growth in the traditionally high-margin category. In the second half of 2000, revenue from advertising and commerce grew more than 70%, said Joe Jordan, equity analyst with PNC Advisors in Philadelphia.

AOL added 1.3 million subscribers during the quarter to boost its customer base to 31.3 million. Although the company raised its monthly subscription fees 9%, its revenue per subscriber rose only 3%.

That could be a sign that the Internet business is maturing, said Paul Kim, senior media analyst with Kaufman Bros. in New York.

“The easy money--the subscriber revenue--is definitely going to slow down,” Kim said.

Margins in the cable business are also declining year over year despite an increase in subscribers. Time Warner Cable revenue climbed 17% during the quarter to $1.8 billion, primarily because of higher subscription fees.

But the company also has boosted spending to upgrade its network for digital services and high-speed Internet access. The company has more than doubled its customer base for those premium services this year, but overall growth in cable subscribers was “a little light,” Corcoran said.

Revenue in the filmed entertainment, cable networks and publishing units rose 4% to 5% and declined 1% in the music division.

Overall, AOL Time Warner said it earned 30 cents per share excluding interest, taxes, depreciation and amortization expenses, better than the 26 cents per share consensus of analysts surveyed by Thomson Financial/First Call.