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AOL zips past fourth quarter estimates

America Online topped analysts' estimates in its fourth quarter Thursday, earning $334 million, or 13 cents a share, on sales of $1.9 billion.

First Call Corp. consensus expected the world's largest online service provider to earn 11 cents a share in the quarter.

Ahead of the earnings report, America Online (NYSE: AOL) shares closed up 2 1/4 to 61 5/8.

The $1.9 billion in sales marks a 39 percent improvement from the year-ago quarter when it earned $155 million, or 6 cents a share, on sales of $1.4 billion.

Frederick Moran, an analyst at Jefferies & Co. predicted AOL would earn 11 cents a share on sales of $2 billion.

For the fiscal year, AOL raked in $1 billion, or 40 cents a share, on sales of $6.9 billion, up from a profit of $391 million, or 17 cents a share, on sales of $4.8 billion in fiscal 1999.

AOL officials, like their Time Warner counterparts earlier this week, were confident that their blockbuster merger with Time Warner (NYSE: TWX) will close sometime this fall.

"This has been a record-breaking year for America Online, and we finished on a strong note with this quarter's performance," said CEO Steve Case in a prepared release. "Just four years after becoming the only Internet company with $1 billion in annual revenues, we are now posting $1 billion in annual profits."

In the quarter, advertising and commerce sales jumped 95 percent from the year-ago quarter to $609 million. For the year, those segments accounted for $2 billion in sales.

CFO J. Michael Kelly said $503 million derived from advertising, $59 million came from merchandising and the remainder fell into the other category. AOL's Web properties brought in an additional $145 million in sales.

Kelly said most of the company's advertisers are large blue-chip companies and AOL is actively managing its backlog. "Despite the consolidation of the dot-coms, advertising revenue is continuing to accelerate," he said.

Across the board, AOL posted impressive gains in virtually every category.

Its total subscriber base surged to 23.2 million after adding another 992,000 members in the fourth quarter. Its CompuServe 2000 service added 146,000 members for the quarter and 1.3 million for year, bringing the combined CompuServe 2000 and CompuServe Classic membership to 2.8 million.

Those subscriptions accounted for $1.2 billion in revenue, up 26 percent from the year-ago quarter.

AOL Europe and Compuserve added another 200,000 subscribers, bring its total to more than 3.6 million users. And, according to Media Metrix, AOL is the top destination for European home users.

The future doesn't look too shabby either.

Company officials said it exited the fourth quarter with a $3 billion backlog in advertising and commerce revenue.

"As long as it continues to improve its operating margins, AOL will remain a core holding for technology investors," Moran said.

Last quarter, AOL beat the Street when it posted a profit of $271 million, or 11 cents a share, on sales of $1.8 billion.

Its shares raced up to a 52-week high of 95 13/16 in December after falling to a low of 38 7/16 in September.

Thirty-eight of the 42 analysts following the stock rate it either a "buy" or "strong buy."

First Call Corp. consensus expects AOL to earn 55 cents a share in fiscal 2001.