(Corrects last name of analyst in 9th paragraph)
By Jennifer Saba
Nov 5 AOL Inc reported
higher-than-expected third-quarter revenue on increased
advertising sales, but earnings fell sharply because of
challenges at its network of community news websites known as
The digital media and entertainment company said on Tuesday
it took a pre-tax restructuring charge of $19 million and an
impairment charge of $25 million, both related to Patch, sending
income down 90 percent to $2 million, or 2 cents per share.
Excluding those items, EPS was 55 cents compared to 22 cents
in the year ago period.
Shares of AOL climbed almost 8 percent in early morning
trade on Tuesday to $41.76.
Investors welcomed cuts at Patch because they have long eyed
it as a problem spot for AOL. Chief Executive Tim Armstrong, who
helped start Patch before he went to AOL, made a big bet on the
network of local sites dotting communities throughout the United
States. Over the years, AOL ploughed more than $150 million in
But in recent quarters AOL has retreated, making deep cuts
in the money-losing operation, and in August it cut the Patch
staff by half, to about 500 employees. The company is looking
for partners to either operate the network or a buyer who would
Armstrong, who is also listed as AOL's chief operating
decision maker, told Reuters, "we're essentially open to the
best outcome for Patch ... we are still working through the
AD SALE PROGRESS
Still, the troubles at Patch did not hurt the company's
ability to increase advertising revenue, an important metric for
AOL as it moves away from dwindling but lucrative subscription
dollars for its dial-up Internet service. Ad revenue rose 14
percent to $386 million on higher display, search and network
"The most important (detail) is that their pricing is up
four percent and is well above expectation," said Needham & Co
analyst Laura Martin about AOL's ability to get more money for
"I think the focus on programmatic and video are exactly the
right strategy," she said.
AOL rolled out a splashy initiative to get more advertisers
to commit dollars on AOL's electronic exchange that includes
video advertising. Video advertising commands higher prices than
other forms of digital advertising.
AOL rivals for instance reported declines in the amount of
money they can get for an ad: Yahoo's display ad
pricing was down 7 percent, while Google said the price
that marketers pay when consumers click on their ads decreased 8
percent in the third quarter.
At its Brand Group, which includes the Huffington Post and
TechCrunch, display ad revenue increased 11 percent. The group's
adjusted operating income was $11 million before depreciation
and amortization, compared with a loss of $10 million a year
Total revenue in the third quarter rose 6 percent to $561.3
million, topping analysts' average forecast of $531.7 million.
The rise included the results of Adap.TV, an electronic exchange
for video advertising that AOL bought in August.
(Reporting by Jennifer Saba in New York and Supantha Mukherjee
in Bangalore; Editing by Saumyadeb Chakrabarty, John Wallace and