Time Warner's America Online division remained weak but showed signs of financial improvement from 2003.
The media titan said its net income for the quarter ended March 31, 2004, before discontinued operations and an accounting change, reached $712 million, or 15 cents a diluted share. That's up from the same period last year, when the company reported a profit of $396 million, or 9 cents a share. Wall Street analysts had expected profits to remain at 9 cents a share this year, according to Thomson First Call's poll of estimates.
Time Warner said its quarterly revenue rose 9 percent to $10.1 billion, beating Wall Street's estimate of $9.5 billion.
The company added that its debt was lowered further to $18.8 billion, down from $22.7 billion at the end of the fourth quarter. Debt reduction has been one of the company's top priorities over the 12 months.
"We're very pleased with the company's strong financial performance this quarter, as we're off to a great start for the year," Time Warner CEO Richard Parsons said in a statement.
AOL turning the corner?
AOL, which has lost more than 2 million subscribers over the past 16 months, said it now has 24 million AOL-branded subscribers. That doesn't include people signed up through its new discount Internet service provider Netscape, its partnership with Wal-Mart Stores and its long-stagnant CompuServe division. Including those services, the AOL division has 25.8 million access members.
As expected, the AOL premium dial-up service lost 800,000 subscribers, ending the quarter at a count of 20.5 million. But the AOL for Broadband service--also called "bring your own access," (BYOA) because it's marketed to people who already have high-speed Internet access from another company--gained 700,000 new subscribers for a total of 2.8 million. Its Netscape ISP, which, and Wal-Mart Connect gained 100,000 new customers for a total of 600,000 combined.
The tally of AOL's "not actively marketed" subscribers--including CompuServe members and those on its $54.95 broadband ISP plan--declined by 300,000 to 1.9 million. The company in March confirmed that it would.
Advertising revenue, which declined 40 percent in 2003, fell 5 percent, or $12 million, year-over-year. However, compared with the previous quarter, the ad business rose 5 percent. Much of the sequential gain was powered by a rise in commercial search revenue from $27 million to $74 million, fuelled by a partnership with Google.
Subscription revenue rose 1 percent, an increase that stemmed from favorable currency exchange rates for AOL Europe and from growth in its AOL for Broadband service.
Cable takes a swing at DSL
Meanwhile, Time Warner Cable reported growth in subscriber additions and profitability, which it credited to high-speed Internet service Road Runner. The cable ISP added 193,000 subscribers last quarter for a total of 3.4 million subscribers.
Time Warner also said it would begin testing a lower-priced, lower-speed broadband plan that would be used "primarily as a retention tool," Don Logan, the chairman of the media and information division, said during a conference call with Wall Street analysts. Time Warner Cable will test a higher-speed, higher-price plan as well, Logan added.
Cable companies have long dominated the market for broadband access in U.S. households in the face of competition fromk the Baby Bell phone companies, which offer DSL (digital subscriber line) service. But the Bells have introduced monthly fees for DSL service that are lower than those charged by cable companies. This past quarter, the two biggest Bells reported record DSL sign-ups, with, and Verizon Communications, a 345,000 increase.
Time Warner also reiterated it plans to launch Internet phone service to all of its cable markets by the end of 2004.