AOL Meets Earnings Expectations

After meeting Wall Street’s earnings expectations for first quarter fiscal 2001 Wednesday, America Online Inc. trumpeted that AOL 6.0 will hit the Net later this month. The company also laid out a roadmap for other products that it will roll out later this year, including nationwide deployment of AOLTV, the launch of an AOL/Gateway household Internet appliance, and the launch of the AOL Mobile Communicator.

The company has high hopes for AOL 6.0, which is the cornerstone of its “AOL Anywhere” initiatives — intended to take the Internet beyond the PC — and will support all broadband platforms. As reported by, AOL began rollout put public beta versions last week. The company said the next generation software “will deliver a new level of convenience and ease-of-use.”

AOL 6.0 will feature AOL Plus multimedia content, full-motion video and streaming audio, the new AOL Media Player, and other elements like the AOL by Phone portal which the company is now beta testing. AOL said AOL by Phone will enable AOL members to use spoken commands over the phone to access AOL features and content.

Further pursuing the AOL Anywhere initiative, the company said it has completed test marketing of AOLTV in eight cities and will soon offer the service through more than 300 Circuit City stores and online.

Another step in the AOL Anywhere initiative will be the rollout of the first AOL/Gateway household Internet appliance, a lightweight appliance with touch-screen access that users will be able to use anywhere in their homes. The company said it will feature the new “Instant AOL” service, and a customized version of AOL’s software which includes AOL Mail, Instant Messenger and services like My Calendar.

In the wireless arena, the company will introduce the AOL Mobile Communicator, a lightweight, compact device which will enable consumers to use AOL Mail and Instant Messenger with a mini-keyboard. The device is made by Research In Motion Ltd. and operates over the BellSouth Wireless Data nationwide network.

Still, the question remains whether AOL can continue to show strong numbers in the face of the dot-com shakeout. In its earnings conference call Wednesday afternoon AOL said the answer was yes. AOL reported net income of $345 million (including charges due to its impending merger with Time Warner) for the first quarter, meeting analysts’ expectations of 13 cents per share. In addition, subscription revenues rose to $1.2 billion, a 21 percent increase over fiscal 2000’s first quarter. Advertising, commerce and other revenues rose to $649 million, an 80 percent increase over last year’s first quarter. And, the company said its advertising and commerce backlog — which indicates future income from long-term deals — rose from $2 billion to $3 billion.

Bob Pittman, president and chief operating officer of America Online, said AOL is insulated from Internet industry shake-ups because its advertising and commerce clients are include many major, mainstream companies like Federated (which owns Macy’s and Bloomingdales), Nascar, Volvo, Target, CitiGroup, Pizza Hut and Office Depot. Pittman added that AOL experienced record subscriber growth in the quarter.

“This record-breaking quarter reflects the great momentum our world-class brands and focused business strategies,” Pittman said. “Clearly our diversified, multiple-revenue-stream business model sets us apart from the industry, and this will be further enhanced by our merger with Time Warner.”

Both Pittman and AOL Chairman and Chief Executive Officer Steve Case assured investors that the Time Warner merger is on track to close the merger this fall. Case said post-merger planning is well along, adding “We’re ready to hit the ground running on day one.”

He also said, “”AOL Time Warner will be a one-of-a-kind company that will launch new platforms for gro

wth and empower consumers in ways we could have only dreamed of just a few years ago. Over the past several months, we’ve worked closely with the Time Warner management team, and we’re confident that we have the right assets, strategies, experience and vision to take full advantage of the tremendous opportunities before us.”

Pittman added, “Our advertising and commerce growth prospects are underscored when you look at the top 100 advertisers each for Time Inc., Turner Networks and AOL, and find that only four out of the 300 are duplicated on all three lists.”

The merger is now waiting on the decision of U.S. regulators. Last week, European Commission officials gave the merger the go ahead.

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