Update: AOLTW returns to profit

AOL Time Warner (AOLTW) returned to profit in the first quarter as revenue in its movie and TV business increased and restructuring measures took hold.

Net profit was $396 million, or $0.09 per share, for the first quarter ending March 31, 2003. This compares with a net loss of $54.2 billion, or $12.25 a share, for the same period a year ago, the company said Wednesday in a statement.

Analysts polled by Thomson First Call predicted earning of $0.04 a share.

Revenue increased 6 percent over the same period in 2002 to $10 billion, while operating income climbed 9 percent to $1.2 billion.

"As our first quarter indicates, we have gotten off to a good start," AOLTW chief executive officer Dick Parsons said during a conference call Wednesday.

The company's AOL Internet division reported an 11 percent increase in operating income on revenue that declined 4 percent. AOL revenue dropped to $2.19 billion for the quarter, compared to revenue of $2.29 billion in the first quarter of last year.

And although the unit's operating income climbed, it was offset by a 42 percent decline in advertising revenues, the company said.

Furthermore, other AOL revenue fell 61 percent, due mainly to the company's strategy to eliminate pop-up ads, according to AOLTW.

The Internet unit also reported a loss in subscriptions from the previous quarter, saying that U.S. subscribers numbered 26.2 million at March 31, down 289,000 from Dec. 31, 2002. U.S. subscriptions for the quarter were 141,000 higher than in the first quarter of 2002, however.

Europe subscriptions numbered 6.3 million at March 31, a decline of 63,000 compared with the previous quarter, but an increase of 368,000 versus the year-ago period. Subscriptions from partially owned entities elsewhere in the world totalled 1.9 million for the quarter, down 465,000 from the previous quarter and 733,000 lower than the first quarter of last year.

Total AOL subscriptions at March 31 numbered 34.4 million, down 800,000 from a worldwide membership of 35.2 million at the end of 2002, according to information released by AOLTW.

AOLTW chairman of the media and communications group Don Logan said that the company is aiming to stabilize AOL this year. He also noted that the unit is a "strong source of free cash flow" despite the dwindling number of narrowband subscribers.

AOL hopes to transition many of its dial-up members to its new broadband service, launched last month. Additionally, Logan said that company plans to continue to add new features and premium services to the new offering in an effort to drum up more revenue.

Furthermore, Logan said that the company is looking into ways to derive more revenue from its strong instant messaging (IM) base, noting that AOL Instant Messenger (AIM) has well over 100 million worldwide users sending 1.6 billion messages a day.