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Analysts eye AOL revenue, subscriber growth

After a rally in technology stocks, Wall Street looks with anticipation toward Internet bellwether America Online's quarterly earnings report.

After the rally in technology stocks today, Wall Street will be looking with anticipation toward Internet bellwether America Online, which is scheduled to report quarterly earnings tomorrow.

AOL is expected to report earnings of 9 cents a share for the third quarter, according to a consensus of analysts polled by First Call.

Analysts are not predicting surprises from AOL. But they will pay close attention to certain metrics reported by the Internet giant, such as subscriber growth and revenue growth based on advertising and e-commerce.

According to Merrill Lynch, revenues are expected to hit $1.77 billion for the quarter, up 42 percent from the same period last year. Of that, $481 million is expected to come from advertising and e-commerce, a gain of about 10 percent year to year.

Jordan Rohan, an analyst at Wit Capital, predicts that AOL will beat estimates by 2 cents a share on the strength of stronger-than-expected audience growth, a key to driving up advertising revenues and e-commerce sales.

In terms of "usage patterns--such as length of time per member per day that it has been increasing so substantially--the company may report growth in line with Yahoo," said Rohan.

Yahoo reported robust gains in advertising revenue earlier this month.

Analysts also will be on the lookout for new details surrounding AOL's proposed $165 billion merger with Time Warner. During Time Warner's conference call with analysts last week, the company touted the cross-promotional possibilities with AOL. Tomorrow, many expect AOL to further clarify the opportunities at hand for the two companies.

"We continue to You've got Time Warnerthink the AOL-Time Warner deal is a smart, strong combination," Merrill Lynch Internet analyst Henry Blodget wrote in an investor's note. "We think the market is coming around to this viewpoint. As evidence, we would point out that AOL has not fallen off a cliff in the past two weeks, as have most Internet company stocks."

In February, Blodget and Merrill Lynch media analyst Jessica Reif Cohen co-authored a research report touting the merger. However, the analysts raised many question about the integration of the two companies' management teams, wondering whether infighting or executive departures could delay the merger's completion.

AOL today closed up $3.75, or nearly 7 percent, at $58.75. Time Warner ended the day up $3.38, or about 3 percent, at $84.63.