AOL Time Warner sees 12 to 15 pct growth

Robert Pittman, President and Chief Operating Officer of the newly combined America Online (NYSE: AOL) and Time Warner (NYSE: TWX) said Tuesday the company should see $40 billion in revenue growth this fiscal year, with 12 to 15 percent revenue growth per year after that.

At a PaineWebber Internet conference in New York, Pittman focused on the financial and broadband synergies of the new media darling and old media baron. The Street has not been impressed with the merger so far; AOL shares closed off 2 3/4 to 71 while Time Warner (NYSE: TWX) rose 25 to 89 3/4 on January 10, when the companies first announced their $350 billion merger. Tuesday, AOL was up 15/16 to 57 11/16. Time Warner shares were up 1 1/4 to 83.

Pittman also saw 30 percent EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization growth, and operating margins of about 20 percent in the first year. AOL Time Warner also has a run rate of almost 1.8 billion, he added.

The combined company will see 1 billion in synergies in the first year, and though the synergies alone could be considered reason enough for the merger, it is the transforming capabilities of the merger which will be its long-term ace.

The companies have touted the broadband synergy of their partnership from the beginning.

"Only AOL Time Warner will have all the brands, tools, creative resources and the infrastructure to monetize them… we can innovate faster because we have all the pieces in house," Pittman said.

Pittman emphasized that the shared infrastructure will give the new company a cost advantage, he added, comparing AOL Time Warner to Yahoo! (Nasdaq: YHOO) and Lycos (Nasdaq: LCOS), which have much larger operating expenses.

When pressured to name competitors, Pittman said Microsoft (Nasdaq: MSFT) and AT&T (NYSE: T) came closest. But "The world is getting blurrier...and every competitor is a collaborator," he added; AOL Time Warner has relationships with both of these companies.

It is consumer loyalty, and the sheer numbers which the two companies will combine, which Pittman focused on as the merger's main advantage. The combined company will include 40 million paid magazine subscribers, 36 million HBO Cineplex subscribers, 21 million AOL members, 13 million cable subscribers, and 2.5 million Compuserve customers.

Investors aren't the only ones who have been skeptical about the duo; the companies are currently trying to resolve the open access issue in order to please Washington as well as Wall Street. Pittman would only say AOL had an MOU (Memorandum of Understanding) on the issue with Time Warner.

Pittman said he was "agnostic" on partnerships and acquisitions, though he indicated acquisitions would be the logical way to extend overseas.