(Adds executive comments, background, share price)
By Jennifer Saba
Feb 8 AOL Inc on Friday reported its
first quarterly revenue growth in eight years on strong search
and advertising sales, sending shares up as much as 14 percent.
The company said total revenue rose 4 percent to nearly $600
million in the fourth quarter, beating analysts' estimates of
$573.7 million, according to Thomson Reuters I/B/E/S.
Advertising revenue, an important measure for the company as
it moves away from subscription-based dial-up services and
emphasizes its media properties, rose 13 percent to $410.6
Advertising sold through AOL's third-party network helped
boost overall revenue. Revenue jumped 37 percent to $183.5
million at AOL Networks, a market to sell inventory on behalf of
This quarter AOL introduced a new reporting structure that
provides more clarity on its business units, including how much
profit each contributes.
AOL shares are up more than 75 percent over the past year.
The run-up came as Tim Armstrong, the chief executive and former
Google Inc ad executive, fended off activist
shareholder Starboard Value in a proxy battle, sold $1 billion
worth of patents to Microsoft Corp, and returned the
money to shareholders.
Questions linger over AOL's business strategy of trying to
market itself as a destination for content like the Huffington
Post and Endgadget, especially since its advertising business is
contributing a small amount to the bottom line.
While the company wants ad sales to be the path to future
growth, the subscription unit, now called the membership group
that includes the dial-up service, is providing the company
Excluding special items, quarterly operating income before
depreciation and amortization (OIBDA) for the membership group
was $158.7 million, most of the total.
By contrast, AOL Networks' OIBDA was $6.4 million.
"It's not great to see so much of the bottom-line
contribution coming from the revenue segment in decline," said
Evercore analyst Ken Sena.
While Sena said the company made "steady progress" over the
past two years, "it still has a ways to go."
Armstrong addressed concerns from analysts who questioned
when AOL would reap the benefits from its advertising revenue
"So the ad business itself, if we ran it purely for
profitability and didn't put any investments in the
(advertising), that I think would be a mistake," Armstrong said
on a conference call with analysts.
The Brand Group, which includes the Huffington Post and
Patch, reported that revenue rose 4 percent to $213.2 million
and adjusted OIBDA totaled $8.8 million.
Patch, a collection of local news sites, missed its revenue
target of $40 million last year. Armstrong blamed Superstorm
Sandy as advertisers along the East Coast pulled back spending.
Net income rose to $35.7 million, or 41 cents per share, in
the fourth quarter from $22.8 million, or 23 cents per share, a
year earlier. Earnings per share were in line with analysts'
In addition to the results, AOL's board authorized the
repurchase of $100 million in stock.
Shares of AOL were up 9 percent at $34.20 in morning trade.
They traded as high as $35.84 earlier in the session.
(Reporting by Jennifer Saba in New York and Sayantani Ghosh in
Bangalore; Editing by Saumyadeb Chakrabarty, Lisa Von Ahn and