AOL Time Warner Inc. showed new signs yesterday that the benefits of merging media and online companies might not be enough to offset an anemic advertising market, as its reported second-quarter revenue rose only 3 percent because of weakness in key media divisions. The news pushed down the company’s stock nearly 10 percent, to $44.65 a share, as investors fretted that AOL might miss its oft-stated financial goals for the year, including a revenue increase of 12 percent to 15 percent increase to more than $40 billion.
Company officials said they remain confident of reaching those targets, although they indicated that $40 billion would be at the top end of the range. Until now company executives have boasted that AOL’s diversified revenue streams, including cable, Internet, movies and music, protected the newly merged company against the effects of a slowing economy. But a widespread falloff in advertising has forced cutbacks throughout the media world—and AOL has not been immune.
“The operating environment is very challenging, and that was reflected in the results of the company,” analyst John Corcoran of CIBC World Markets said.
Whether AOL can achieve $40 billion in annual revenue is going to “be a real challenge,” he said. “Instead of the bar over which they can jump, now it’s the high end of the range. They have left themselves a lot of ground to make up in the next two quarters.”
Much of AOL‘s hope now rests on the success of ...read more