Services & Software

AOL posts $971M profit on patent sale as decline slows

The Internet stalwart shows gains in global advertising revenue and Web traffic in second quarter, despite losing more subscribers.

Is AOL dead? Not if Tim Armstrong has anything to say about it.

The tech-cum-advertising-cum-media company reported its second-quarter earnings this morning, beating analysts' estimates and slowing a years-long decline in revenue.

Sure, "We're the least bad we've been in the last seven years" is not exactly an encouraging statement -- it's like something you might have seen in an old Chicago Cubs press release -- but improvement often means opportunity on Wall Street. (In case you didn't get my humor, no, AOL didn't actually say that.)

AOL swung to a profit of $970.8 million, or $10.17 a share, thanks largely to the sale of its patents to Microsoft. A year ago, it posted a loss of $11.8 million, or 11 cents a share.

Analysts expected $519 million in revenue; AOL posted $531 million.

During the quarter, AOL's total revenue declined 2 percent, its lowest rate of decline in seven years, as its global advertising revenue grew 6 percent, boosted by gains in international display advertising and its third-party network.

Most critically, AOL's domestic display advertising revenues held, with neither growth nor decline year over year. Since more than half of AOL's in-house ad dollars come from this group, that means the foundation remains stable.

AOL also improved its Web traffic figures, growing unique visitors 4 percent, quarter over quarter, to 112 million. The Huffington Post, Moviefone, Engadget, TechCrunch, Patch and Stylelist count among AOL's media properties.

But the company's subscription revenues continued to dwindle, dropping 13 percent year over year, even as it reduced its customer turnover rate to 1.7 percent. Subscription revenues represent one-third of AOL's total revenues.

Finally, the company reported $1.5 billion in cash on hand, thanks to its massive patent licensing deal with Microsoft.

"The strong results and consumer performance we announced today are clear signs our strategic and operating efforts are translating into significant financial progress," Armstrong said.

Correction, 6:41 a.m. PT: This story originally misstated the size of the drop in subscription revenues. For the second quarter, those revenues were down 13 percent from the year-earlier period.