The much-vaunted union of old and new media, highlighted by the merger of AOL and Time Warner in January last year, appears to be paying off as the company has turned in financials ahead of Wall Street expectations, despite a downturn in the US economy and slowing ad revenue streams.
AOL Time Warner yesterday said that first quarter earnings had risen by 20% to $2.1 billion on revenues of $9.1 billion, up 9% on the previous quarter. The group said that free cash flow has increased by over 400% to $651 million and earnings per share were up 21% to 23 cents.
The overall net loss for the period was $1.4 billion, down from $1.5 billion the previous year.
The results are ahead of the Wall Street consensus which had put earnings at 20 cents per share. ABN Amro had expected 22 cents per share. However, the broker said that it was curious about a sharp $3.9 billion fall in the balance sheet for the company’s cable television and sports franchises.
AOL Time Warner CEO, Gerald Levin, said that the company remains on target to achieve $40 billion in revenue and $11 billion earnings this year. AOL’s confidence comes at a time when the US economy is slowing and advertising revenues are taking a downturn for many media owners (see International).
The alliance of traditional offline media with the internet has been seen by many media commentators as the future for the industry. The logic is that offline media cannot afford to ignore the internet and online media sites need the content and years of expertise that traditional media groups can provide.
The merger of AOL and Time Warner was seen as the definitive affirmation by a huge offline media group of the strength in this logic.
