AOL Time Warner Takes $10bn Charge Related to AOL Unit

10 January 2003

The frantic flounderings of America Online have compelled parent AOL Time Warner to plan a massive $10 billion (€9.53bn; £6.22bn) charge against earnings later this month to compensate for a nosedive in the market value of its internet service unit.

The eyewatering hit was due to be formally disclosed on January 29 along with the media mammoth’s annual results. However, the beans were spilled in an article in Thursday’s Washington Post, although analysts have already been warned that a “substantial non-cash charge” could be expected.

Confronted with the actual figure, First Albany analyst Youssef Squali said: “It is going to be a headline grabber because it is going to be in the tens of billions of dollars … it should come as no surprise, but the magnitude of it will raise eyebrows.”

AOL TW insists, however, that the bad news – which accompanies continuing declines in AOL’s ad revenues and subscriber growth – will not adversely affect the company or jeopardize its relationships with its bankers.

Nor, according to the group, will the planned charge affect EBITDA (earnings before interest, tax depreciation and amortization).

Data sourced from: The Washington Post Online; additional content by WARC staff