AOL TIME WARNER REPORTS STRONG 4TH-QUARTER GAINS FOR AOL, CABLE
Holding its first meeting with investors and analysts in N.Y.C. Wed., AOL Time Warner said it posted sizable revenue, cash flow, subscription and other gains for its online and cable system operations in 4th quarter ended Dec. 31 and for all of last year. But, with its film and music units showing particularly sluggish results, newly merged company reported much heavier pro forma losses for quarter and year despite overall revenue growth. AOL Time Warner said it expected continued strong revenue, cash flow and subscription growth in first quarter 2001 and for whole year but declined to forecast future earnings results. Company also outlined commercial launches and marketing trials for various new services, including video-on-demand (VoD), IP telephony and multiple ISP offerings, and expanded “strategic relationship” with TiVo.
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AOL Time Warner said its pro forma net loss increased to $1.1 billion for 4th quarter, from $194 million year earlier, despite rise in overall revenue to $10.2 billion from $9.5 billion. Company said its pro forma net loss for year widened to $4.4 billion, from $2.4 billion in 1999, despite increase in overall revenue to $36.2 billion from $32.5 billion. But its adjusted cash flow climbed 14% to $2.4 billion for quarter and rose 19% to $8.4 billion for year as subscription, advertising and commerce revenues all registered double-digit percentage gains. Advertising and commerce revenues posted particularly strong gains, especially for AOL online side.
On cable side, AOL Time Warner said its 4th-quarter revenue climbed 13% to $1.6 billion while its adjusted cash flow grew 16% to $767 million. For full year, cable unit’s revenue also climbed 13% to $6.1 billion while its adjusted cash flow rose 15% to $2.8 billion. MSO said it added 479,000 new digital cable subscribers for quarter, and 1.3 million for year, to close 2000 with 1.7 million digital subscribers. Time Warner Cable Chmn. Joseph Collins said company ended year signing up average of 37,000 new digital cable customers per week, generating $13 in incremental monthly revenue per digital subscriber.
AOL Time Warner said its Road Runner high-speed data operation signed up 227,000 subscribers for quarter, and 616,000 for year, to end 2000 with 946,000 customers, or about 9% of its total cable customer base of 12.8 million. With Road Runner ending year adding 17,000 new customers per week, company said it has expanded its trial of IP telephony service over high-speed cable lines to 2nd market, Rochester, N.Y. As in Portland, Me., its first market, company plans to offer its base telephony service to 1,000 Road Runner customers in Rochester for $9.95 per month. AOL Time Warner also reiterated its plans to offer multiple ISP carriage to its high-speed data customers, starting with twin offering of AOL and EarthLink in several markets this summer.
Collins emphasized Time Warner Cable’s intentions to roll out its new VoD service in number of its major cable clusters this year. MSO spokesman later said company aimed to begin service, now in 3 markets, in another 10 to 15 by year-end. In addition, cable unit, which operates regional news channels in 5 markets, plans to introduce similar news channels in 6 more markets this year, including 2 each in N.Y., Tex., N.C.
Noting that Time Warner Cable had upgraded 92% of its cable systems to 750 MHz, Collins said MSO’s huge capital spending campaign was coming to end. “The construction project is over,” he said, predicting that company’s cable plant would be 100% rebuilt by end of year. “There’s really nobody else in the cable business within hailing distance of that,” he said.
AOL Time Warner said its TV networks division eked out 4% increase in revenue to $1.8 billion for quarter as advertising and commerce revenues stayed “essentially flat” at $705 million and unit’s cash flow dipped to $443 million from $447 million. For year, division’s revenue rose 10% to $6.8 billion for quarter and its cash flow climbed 7% to $1.5 billion. Company also said CNNfn would change its name to CNN Money and become more consumer- focused later this year.
Trumpeting AOL’s continued success, AOL Time Warner said its online unit’s net income excluding one-time charges jumped 67% to $365 million for quarter, as revenue rose 27% to $2.1 billion. Quarterly revenue climbed 16% to $1.2 billion while advertising and commerce revenue soared 71% to $686 million. But, largely because of $535 million in investment write-downs, AOL’s actual net income plummeted to $37 million from $280 million in 4th quarter 1999. AOL posted total net income of $1.2 billion for year, up from $1.0 billion in 1999, as its revenue rose to $7.7 billion from $5.7 billion.
AOL Time Warner said its flagship AOL service added 2.1 million new subscribers for quarter and 6.2 million for year to end 2000 with 26.7 million worldwide, including more than 5 million outside U.S. The company said its CompuServe service added 213,000 members for quarter and 897,000 for year to close 2000 with nearly 3 million, including 1 million outside U.S. AOL Chmn. Barry Schuler predicted 2001 “will be a very profound year for AOL” because service should scale 30-million member mark despite continuing dot.com fallout. “The winning [economic] model is going to be a multiple revenue stream model,” he said. Pointing to CompuServe’s complementary growth, he also said “the whole multiple brand strategy has been working very well for us.”
In other online earnings results, AOL said its: (1) Average member usage per day rose to 63 min. in 4th quarter from 57 min. year earlier. (2) Operating income before one-time events increased 62% to $503 million for quarter. (3) Operating margins improved to 24% from 19%. (4) Cash flow before one-time events climbed 58% to $652 million. (5) Cash flow from operations rose 62% to $571 million. (6) Members spent $4.6 billion shopping online during holiday season and $20 billion over full year, double 1999 amount.