AOL Time Warner records record first-quarter loss

America Online, the Internet engine that was supposed to propel Time Warner to new levels of success when the two companies merged nearly two years ago, has instead veered off and is dragging the more conventional media elements through the muck and mire of a record-setting first-quarter loss.

AOL’s futility in attracting online advertising overcame success stories in the company’s cable and entertainment sectors as AOL Time Warner posted a record-setting $54.2 billion quarterly loss. This breaks out to $12.25 a basic share loss, compared with a net loss of $1.37 billion, or 31 cents a share a year earlier.

The quarter included a $54 billion charge to write off goodwill in line with accounting changes to reflect the decline in the value of the $106.2 billion purchase of Time Warner. More positively, the company reported that its revenue grew 4% in the quarter to $9.8 billion and that its cash earnings rose to 18 cents a share from 16 cents last year.

“All those metrics exceeded our expectations,” said CEO-elect Dick Parsons.

AOL was another story. Stung by a more severe advertising shortfall than company officials expected, AOL is expected to drag down earnings for the remainder of the year, Parsons said.

“Online advertising is a disappointment,” he added. “We think we’ve now gotten underneath the situation.”

Part of the plan is to put AOL under the watch of COO-elect Bob Pittman, who promised, “We moved already to put the pieces in place for rebuild. Our goal is to be in the growth mode in the second half of the year and then get back our real momentum in 2003.”