AOL Time Warner Inc took a massive US$54.24 billion writeoff because of a sharp decline in its stock price, resulting in the largest quarterly loss ever for a US company.
The loss, which the company had previously disclosed, was mandated by new accounting rules forcing companies to recognize declines in value after mergers are made. AOL's stock has fallen by more than half since the merger of America Online and Time Warner was announced in January of 2000.
Without the effect of the writeoff, which was the same amount as the net loss, the company lost US$1 million in the first quarter, compared with a net loss of US$1.4 billion reported in the same period a year ago.
AOL Time Warner also acknowledged weakness in its America Online unit, an area that has been causing increasing concern among investors. Earnings at AOL fell 15 percent on essentially flat revenues, results that Dick Parsons, the incoming chief executive officer, called a "disappointment." But Parsons, speaking to investors on a conference call, also said the company was ``underneath the situation.''
AOL was once considered the critical growth engine at the giant media conglomerate, but is now the laggard. AOL's lower results came despite higher earnings in every other category of business at AOL Time Warner -- cable, publishing, cable networks, music and filmed entertainment.
In an effort to address AOL's problems, the company put one of its top executives, Bob Pittman, back in charge of the division earlier this month, a post he had held before the merger. "Getting America Online back on track is my number one priority," Pittman said on the conference call.
AOL's supercharged growth has stumbled in recent months as subscriber growth slowed and online advertising slumped. Parsons sought to dispel concerns about AOL, saying the "swirl is out of line with the reality. ... Anyone who doesn't believe in the future of this medium is making a big mistake.''
AOL Time Warner also reduced its estimate for full-year growth in earnings before interest, taxes, depreciation and amortization to a range of 5 percent to 9 percent, below its previous estimate of 8 percent to 12 percent. The company blamed lower online advertising for the shortfall.
Without the effect of the accounting change and other one-time items, AOL Time Warner's results beat analyst expectations. Earnings per share rose to US$0.18 a share.
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