The Inquirer-Home

Microsoft helps AOL turn a profit as revenue continues to slide

Calls one-time cash 'significant financial progress'
Wed Jul 25 2012, 15:56

DIAL-UP INTERNET SERVICE PROVIDER AOL managed to post an impressive $970m profit after flogging a significant chunk of its patent portfolio to Microsoft.

AOL which has been in a death spiral for well over a decade provided a rare glimmer of sunlight by flogging a number of its patents for $945.8m. That sale helped AOL report profits of $970.8m on revenues of $531.1m generated from advertising, subscription and its other businesses.

Aside from AOL's one-time sale, which has helped boost the amount of cash the firm has in the bank, looking beyond the headline figures the firm's performance isn't good. While AOL posted a six per cent rise in advertising revenue, its bread and butter subscription business is down 13 per cent to $175.5m while its other businesses saw revenue decline by 19 per cent.

While AOL is desperately trying to become a content provider, its statistics are not showing much growth in unique visitor counts. The firm said it lost one million unique US visitors to its web sites from the same time last year. It did not mention international visitors to its web sites.

Nevertheless AOL CEO Tim Armstrong was bullish, saying the results in the form of adjusted operating income before depreciation and amortization (OIBDA) were a significant turnaround for the firm. "Today's results represent a significant milestone for AOL as we returned to Adjusted OIBDA growth for the first time in four years. The strong results and consumer performance we announced today are clear signs our strategic and operating efforts are translating into significant financial progress," said Armstrong.

While Armstrong might claim these are strong results, the fact is that AOL hasn't offset its loss of subscribers by flogging advertising. Being fair to Armstrong, AOL's advertising business is growing, but it will need to spend a lot of the almost $1bn it gained from its patent deal with Microsoft to ramp up its advertising efforts if it is going to have any hope of competing against Google, Facebook, Yahoo and Microsoft. µ


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