AOL to buy, posts higher 2Q revenue

AOL to buy, reports higher 2nd-quarter revenue, lower net income due to year-ago gain

Associated Press

NEW YORK (AP) -- AOL Inc. reported a 2 percent revenue increase for the second quarter on Wednesday and said it is buying video advertising platform for $405 million, as it bets on the lucrative promise of online video ads.

The Internet company earned $28.5 million, or 35 cents per share, in the April-June quarter. That's down 97 percent from $970.8 million, or $10.17 per share, in the same period a year earlier. The year-ago results included a gain of $970 million from a patent deal with Microsoft Corp. Excluding one-time items totaling 11 cents per share, AOL would have earned 46 cents per share in the latest quarter, surpassing Wall Street's expectations.

Revenue rose 2 percent to $541.3 million from $531.1 million, slightly below analysts' estimates.

Analysts, on average, were expecting earnings of 44 cents per share, on revenue of $544.6 million, according to by FactSet.

AOL increased its advertising revenue by 7 percent to $361.2 million from $337.8 million. Subscription revenue continued to fall as fewer people signed up for the company's fading dial-up Internet service. It was down 5 percent to $ 166 million from $175.5 million.

CEO Tim Armstrong said the purchase "will make AOL a clear global leader in the most important growth segment in our industry — online video."

"''The founders and team are on a mission to make advertising as easy as e-commerce and the two companies together will aggressively pursue that vision," Armstrong said in a statement.

The $405 million purchase price includes about $322 million in cash and about $83 million in AOL stock. AOL said it expects to close the deal for the San Mateo, Calif.-based company in the third quarter.

Research firm eMarketer expects spending on digital video advertising in the U.S. to grow 41 percent to $4.09 billion this year, up from $2.89 billion last year.

Shares of New York-based AOL rose 83 cents, or 2.3 percent, to $37.02 in late morning trading. The stock has traded in the 52-week range of $29.16 and $43.93, and is up about 25 percent since the start of the year.

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