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AOL beats estimates
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July 20, 2000: 7:27 p.m. ET
Ad, e-commerce, subscriber growth hike profit 2 cents above estimates
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NEW YORK (CNNfn) - America Online, the world's biggest Internet service provider, on Thursday posted a fourth-quarter profit that surpassed Wall Street's expectations, powered by strong advertising and e-commerce revenue and subscriber growth.
Excluding one-time items, AOL (AOL: Research, Estimates) earned $334 million, or 13 cents a share, for the three months ended June 30, compared with $155 million, or 6 cents a share, in the year-ago quarter.
 The results came in at the high end of Wall Street analysts' expectations. According to First Call, a consensus of experts had expected a profit of 11 cents a share.
Revenue for Dulles, Va.-based AOL, which is merging with Time Warner Inc. (TWX: Research, Estimates), the parent of CNNfn, rose 39 percent to $1.9 billion from $1.4 billion for the same period in 1999, right within the range anticipated by analysts.
The company's revenue from advertising and electronic commerce nearly doubled to $609 million in the latest quarter, for a total of nearly $2 billion for the full year.
Strength in advertising, commerce revenues
Additionally, the company's advertising and commerce backlog - which details contractually committed revenue to be recognized at a future date - doubled over the year to $3 billion, up $300 million in the last three months alone.
For the full year, net income excluding special items, rose to $1 billion, or 40 cents per diluted share, on consolidated revenues of $6.9 billion, up from $4.8 billion in the previous fiscal year.
"This has been a record-breaking year for America Online, and we finished on a strong note with this quarter's performance," said Steve Case, AOL's chairman and chief executive. "Just four years after becoming the only Internet company with $1 billion in annual revenues, we are now posting $1 billion in annual profits."
Analysts said the results were impressive and proved the ability of AOL, a so-called "blue chip" technology stock, to grow even as other Internet companies struggle to turn a profit.
 "It was important of them to show that they weren't seeing any slowness in the quarter -- it seems like they did that," said DB Alex. Brown analyst Andrea Williams Rice.
Many Internet companies that only last year sported startling revenue growth and bloated stock prices, are now driven by a need to spend money to capture customers. Many fail to do so before running out of cash.
But Web leaders like AOL and Yahoo have demonstrated that Internet companies, particularly big ones with solid business models, can succeed in any economic environment.
"The money is out there for the big players," Rice said. "The big ones continue to get bigger."
AOL shrugs off slower subscriber rev growth
The company said its AOL Internet service added 992,000 net new members in the fourth quarter, and 5.6 million members for the full year, bringing its total membership to 23.2 million members worldwide as of June 30.
Despite the strong subscriber growth, AOL's revenue from subscriptions were only $1.18 billion, up from $1.15 billion in the third quarter, but short of analysts' estimates of around $1.2-to-$1.25 billion.
The company shrugged off the shortfall as a function of the seasonality of the fourth quarter, typically one of the company's slowest, when users tend to log on less frequently.
On a conference call with analysts, AOL executive insisted the subscriber business was indeed strong, with more users signing up, and then spending more time online -- usage per member per day was 58 minutes during the quarter, compared with 52 minutes during last year's fourth quarter.
In addition to the core AOL service, America Online also reported growth in registered users of its other personal communication services, AOL Instant Messenger, and ICQ. Moreover, membership at AOL's other online service CompuServe, grew to 2.8 million, giving AOL some 26 million total subscribers.
AOL's Case said the merger plans with Time Warner were coming along as expected, and added that he sees the deal closing before the end of the year, after the U.S. and European government officials okay the marriage.
"We are highly confident we will get all the necessary approvals to close this deal in the fall," Case told analysts on a conference call.
The report was released after the close of regular trade. Shares of AOL closed at 61-3/4 up 2-3/8 on Thursday. 
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