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AOL Beats Street Estimates

For the first time as a combined unit, AOL Time Warner, Inc., released its pro forma numbers for 2000, with an 11 percent increase to $36.2 billion in revenues and $8.4 billion in earnings before interest, taxes, depreciation and amortization.

In what AOL officials claim is the backbone of its operations, subscriptions, the company announced gains of 13 percent, or $14.7 billion, helped by AOL's 1.2 million fourth quarter customer additions.

The numbers beat Wall Street's analyst expectations, many who were uncertain how the $106 billion merger between America Online, Inc., and Time Warner, Inc., would pan out.

The Federal Communications Commission, with conditions, approved the merger in early January.

America Online, which was in the midst of its second quarter, decided to switch its fiscal year to match Time Warner, which just ended its fourth quarter. From here forward, the two companies will announce its quarterly report as one entity.

Officials were quick to point out the real value of the consolidation process won't bear fruit until the first quarter and into 2001, when synergies fall into place. And despite the fact that the combination of the world's largest Internet service provider and the largest entertainment company in the U.S. creates an industry behemoth, executives say the company will function like a startup.

Jerry Levin, AOL Time Warner chief executive officer, said in an investor's conference Wednesday that this is a company imbued with an entrepreneurial spirit.

"I love change, change is good. You've got to be good at it and you have to be first-to-market," Levin said. "That's not what the predecessor companies were, that's what this new company is. It's very nimble, you can just see that by the stream of activity. You know, we're saying that we hit the ground running, that's not just an euphemism."

AOL Time Warner's accountants are also looking forward to a profitable year.

Mike Kelly, the company's chief financial officer, predicted across the board gains in every area of the new company, capped by a 12 to 15 percent growth over 2000 and a 20 to 24 percent EBITDA growth. Revenues from its subscriptions, a combination of AOL's Internet arm and Time's publishing department, are expected to grow at least 10 percent.

Cash flow will double in 2001, Kelly said, because of the combined company's unique cross-marketing platform, which integrates the old media with the new.

"We'll maximize our growth opportunities through cross-company initiatives," Kelly said. "The announcements today really start to demonstrate the promise we have with this advertising platform across the operation. It will drive cost efficiencies through the infrastructure. If you look at what we've been able to do at AOL, we can leverage that through the cable companies and through the other units."

AOL's stock climbed this morning on the news, up 1.38 to $55.69 a share.



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