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News > Technology
AOL - We've got profits!
August 4, 1998: 6:36 p.m. ET

Online service dials up Q4 profit of 23 cents before charges
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NEW YORK (CNNfn) - Online service America Online Inc. Tuesday reported significantly higher profits and revenues for its fiscal fourth quarter ended June 30.
     The company earned $57.3 million, or 23 cents a share, excluding one-time charges. That compares to a profit of $5.6 million, or 3 cents a share, a year ago. Revenues surged 67 percent to $792 million.
     "Entering our new fiscal year, we're not only the biggest in the industry, but the most profitable. Fiscal 1998 was more than a great operational year for us, but it will serve as a strong foundation for years of profitable growth," AOL President Bob Pittman said in a conference call.
     Analysts surveyed by First Call had predicted a 19 cent profit. However, the so-called whisper number, which is the unpublished estimate of analysts, was as high as 24 cents.
    
One-time charges in question

     AOL did not report final net income figures because previously announced, one-time charges are still being tabulated.
     Expected charges include payment to settle a 1997 shareholder lawsuit as well as write-offs connected to recent acquisitions of Mirabilis Ltd., makers of an instant messaging program and NetChannel Inc., which provides Internet access through a set-top box.
     Earlier this year, AOL paid $29 million for NetChannel and $287 million for ICQ. When the deals were announced, AOL said it would take a one-time research & development charge to pay for the deals.
     The company is working with the Securities & Exchange Commission to ensure the accounting method will comply with current securities laws.
     Also, AOL is working to finalize the financial impact of a shareholder lawsuit. AOL believes the lawsuit will end up costing between $17 million and $18 million after insurance. The lawsuit was brought by a group of subscribers when AOL's network was overloaded and users had difficulty logging on.
     For the year, AOL earned $134 million, or 55 cents a share, before special charges. That compares to a loss of $13.4 million, or 7 cents a share, a year ago. Revenues rose 54 percent to $2.6 billion from $1.7 billion a year ago.
     Analysts had forecast a profit of 51 cents for 1998.
     The earnings were released after Tuesday's market close. AOL (AOL) shares ended down 5 to 111 in composite trading in a day marked by heavy market losses. Shares slumped to 110 in after-hours New York trading.
    
Ad revenue, membership increases

     AOL said its backlog of multi-year advertising and commerce deals stood at $511 million. The backlog is three times larger than a year ago.
     The money comes out of the backlog and on to the profit and loss statement as soon as the ads start running.
     AOL's membership grew by 665,000 users during the quarter. For the year, membership climbed from 8.6 million to 12.5 million.
     Outside the United States, the company has 2.5 million users of AOL and CompuServe. Launches are scheduled later this year in Hong Kong and Australia.
    
Case: Outlook for 1999 remains bright

     Looking to 1999, Case said he is optimistic the company can meet analysts' expectations of a 91-cent a share profit.
     "If we continue to grow membership, advertising and commerce, we believe we will continue to show very strong growth in profits.
     "The overall driver will be turning this into a mass medium. The question is who's going to get those customers.
     "We're not going to get complacent, but we've created a service that's fun and easy to use. Those factors and the general shift in spending to new media positions AOL as the best brand in the industry."Back to top

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