AOL sees drop in ad revenues but says it will meet previously issued financial forecast for '02

NEW YORK, NEW YORK - America Online will meet its previously issued 2002 financial forecast, but expects a drop of 40 to 50 percent in advertising and other non-subscriber revenues next year, the world&#39;s biggest Internet service provider said Tuesday. <br> <br> Just before a scheduled update on the AOL Time Warner division&#39;s financial outlook, America Online said it expected overall 2003 revenues to be flat despite those losses. The company said it expected ``solid growth&#39;&#39; in worldwide subscription revenues to limit the damage. <br> <br> More details were expected later Tuesday, as America Online executives briefed Wall Street in the first major, strategic update since news this summer the Justice Department and Securities and Exchange Commission were investigating the division&#39;s accounting practices. <br> <br> Wall Street will also hear for the first time from Jon Miller, the company&#39;s new chief executive. Miller, who was hired in August following a management shake-up, has had some contact with the investment community but so far offered few specifics. <br> <br> ``This is the first opportunity for the new management at AOL to talk about their plans and that&#39;s going to be important,&#39;&#39; said Phi Leigh, digital media analyst at Raymond James & Associates. ``America Online went from being the crown jewel of this company to the albatross. And Miller&#39;s mission is to turn that around.&#39;&#39; <br> <br> Analysts expect the update to focus on two messages. First, that America Online is only one part of AOL Time Warner, which continues to do well in its movie, music and other divisions. And, second, that America Online is focusing on profitability, rather than costly growth strategies of questionable value such as bombarding mailboxes with computer disks containing its products. <br> <br> ``I&#39;m expecting them to lay out a plan that might take three to four quarters to execute, and that at least initially will stabilize the business and get it back on the growth track for 2004,&#39;&#39; said Michael Gallant, an analyst at CIBC World Markets Corp., who expects cost-cutting and pullbacks in areas like marketing expenses to accomplish those goals. <br> <br> Although the accounting issue is likely to be discussed, many on Wall Street feel that problem is already reflected in AOL Time Warner&#39;s stock price. <br> <br> The stock is currently trading at more than $16 per share, after starting the year above $30 and then dipping below $10. They say the company&#39;s bigger priority will likely be convincing investors that America Online is capable of making money in an environment where advertising and new subscribers are no longer reliable profit drivers. <br> <br> In particular, analysts want to hear what America Online is doing to expand its high-speed, or broadband, business. The bulk of America Online&#39;s members access the Internet via dial-up connections, but the growth prospects for that market is slowing as Internet users switch to broadband performance. <br> <br> America Online offers broadband, but its product is pricier than others, and many investors are concerned the company is losing ground. <br> <br> America Online is also expected to discuss efforts to make more of its content unique, so that consumers have a reason to choose its service over competitors. The division is reportedly negotiating with Time Inc., another AOL Time Warner unit, about making Time&#39;s magazine content available exclusively on America Online, rather than the entire Internet. <br> <br> E-commerce is another possible source of profits. Miller, in his previous job at USA Interactive, oversaw Expedia.com and other e-commerce operations, and many expect him to push similar initiatives at America Online.

http://accesswdun.com/article/2002/12/187040