AOL Time Warner Chief Forecasts Gloomy Q1 for Ad Income

01 February 2001

AOL Time Warner, the newly merged largest media group in the world, yesterday posted a Q4 loss and warned of a slow first quarter due to falls in ad revenue.

Speaking at an analyst conference, AOL’s chief financial officer Michael Kelly announced a pro forma net loss of $1.09 billion, due to merger costs and one-time items as well as losses in Time Warner’s cinema, music and networks divisions.

He also forecast a Q1 increase in total revenue of 8%–10% (compared to 12%–15% for 2001 as a whole), and a rise in ad and commerce revenue of 9%–11%, half the rate expected for the full year.

In a further sign of a downturn in the ad market, the group’s AOL unit declined for the first time to reveal its advertising backlog for the coming quarter, prompting some to suggest that the figures are less than encouraging. This despite the fact that the unit saw a 65% jump in Q4 ad revenue to $741 million.

However, the tone of the meeting was upbeat, as Kelly predicted that growth would increase “very strongly as we get through the year.” Underlining his point, he forecast a 30% rise in EBITDA (earnings before interest, taxes and amortization) for 2001, despite Q1 growth of only 18%–19%.

TW also announced cross-advertising deals with Nortel Networks, Cendant and Compaq Computers, as it seeks to boost ad revenue across its many divisions. The trio, which previously would have bought ads on different units of AOL or Time Warner, now buy a package spanning the merged company’s on- and offline interests.

News source: Wall Street Journal