Fourth-quarter losses skyrocketed at AOL Time Warner Inc. after a staggering $45.5 billion charge to account for the struggling media conglomerate’s plunging value. The company also announced Wednesday that former cable TV mogul Ted Turner is stepping down as vice chairman.
In the three months ending Dec. 31, AOL lost $44.9 billion, or $10.04 per share, compared with a loss of $1.8 billion, or 41 cents per share, in the fourth quarter of 2001.
Revenue rose 8 percent to $11.4 billion, and AOL said its results without the one-time accounting markdown would actually have beaten Wall Street estimates – at 28 cents per share instead of the 26 cents and $11.2 billion in revenue predicted by Thomson First Call.
Turner, who pioneered cable television and built CNN before selling to Time Warner in 1996, will leave in May. He has long been reported to be unhappy with his diminished role since the merger with AOL, but AOL chief Richard Parsons said Turner wants to spend more time on his philanthropic endeavors.
“He’s concluded now is the right time to make more space for his other activities,” Parsons said in a conference call with analysts.
Turner’s exit coincides with the pending departure of Chairman Steve Case, the America Online co-founder, putting the disparate histories of AOL Time Warner’s divisions even further into the past as the mammoth company plots its turnaround.
Whether Turner – who owns nearly 3.5 percent of the company – will remain on AOL’s board at all will be determined in the next few weeks, spokeswoman Mia Carbonell said.
Analysts had been expecting AOL take a goodwill writedown but were surprised by its enormity.
The announcements were made after the markets closed. AOL stock closed higher, up 30 cents per share at $13.96 on the New York Stock Exchange. The shares dropped 10 percent in the extended session.
Executives said they expect 2003 revenue to grow “in the mid-single-digits” and earnings before taxes, depreciation and amortization to be essentially flat. Analysts had been forecasting roughly 5 percent growth in revenue.
Two years after AOL and Time Warner’s $106 billion merger, which could be considered the crowning moment of the Internet boom, the company has been forced to justify the rationale for the deal and overcome questions about its accounting.
The bright spot has been Time Warner’s media properties, which include CNN, Warner Music, Time and People magazines and the Warner Bros. film division that boasts blockbuster franchises like “Harry Potter” and “Lord of the Rings.”
The weak link has been the AOL online division, which now hopes for a jolt from expanding high-speed Internet access and rolling out new music, information and shopping services. AOL’s membership now totals 35.2 million, up nearly 2 million in 2002.
It took double-digit growth in AOL’s cable, TV networks and movie divisions in the fourth quarter to make up for a 6 percent drop in revenue from the online division.
AOL Time Warner this week also sold its 8.4 percent stake in Hughes Electronics Corp., the parent company of the DirecTV satellite service, for $800 million as part of a plan to reduce debt to $20 billion by the end of this year.
Analysts have speculated that AOL will make other cash-raising moves, such as selling its book-publishing division and the Atlanta Braves, the baseball team Turner brought into the media empire.
Parsons said he was pleased with the fourth-quarter performance and pledged to “run each of our businesses as well or better than before, with a continued major focus on stabilizing and revitalizing America Online.”
The massive goodwill writedown disclosed Wednesday comes on top of a $54 billion charge taken in the first quarter to account for the company’s stock decline. That move at the time gave AOL the biggest quarterly loss in U.S. business history.
So for all of 2002, AOL lost $98.7 billion, or $22.15 per share, on revenue of $41.1 billion. In 2001, the company lost $4.9 billion, $1.11 per share, on revenue of $38.5 billion.
