America Online Profits Soar

America Online Inc., the worlds largest Internet access provider, posted sharply higher earnings as subscribers and advertisers signed onto the system in record numbers, the company said on Tuesday The Dulles, Va.-based company reported $20.8 million, or 17 cents a share net income in the December quarter on a record $592 million revenues, topping analysts First Call consensus earnings estimate by a penny a share.AOL added almost 1.3 million new members this quarter, and members increased their usage, demonstrating that were becoming more and more a part of peoples daily lives, Chairman Steve Case said in a statement. Reuters

In last years fiscal second quarter, which ended Dec. 31, America Online lost $129.1 million or $1.37 per share on $409.4 million revenues.

 

The company also announced a 2-for-1 stock split Tuesday, a day after its stock price surged on news of higher rates for unlimited monthly access and cost-cutting at its CompuServe Interactive Services Inc. subsidiary.

As millions of consumers booted up new computers over the holiday season, America Online added 1.267 million new subscribers. The increase, the largest since flat-rate pricing debuted in December 1996, left AOL with more than 11 million subscribers in late January, it said.

During the holidays, online shopping activity also doubled on the network. Company executives said holiday shopping could emerge as a significant online business in the years ahead.

Were beginning to see that convenience truly is a metric. People are willing to pay more to save time, and in many case are paying less by shopping online, America Online President Robert Pittman said.

America Online is now handling 26 million e-mails, nearly 60 million stock quotes and more than 700 million World Wide Web hits a day. Members spend an average of 41 minutes a day online, up from about 21 minutes a day a year ago, it said.

At peak periods, more than 640,000 computers are online with AOL, which is adding about 30,000 modems a month to its system and now has about 700,000 modems available to members.

When you start getting that type of usage, you have a choice: either take down the quality of the service or you improve it, Pittman, who was named president and chief operating officer Monday, said.

That steady surge in subscribers and the amount of time they are spending in cyberspace forced America Online to cut costs and boost rates. Monday, it announced plans to raise rates for unlimited use $2 to $21.95 a month.

In its fiscal second-quarter, America Online subscribers paid $483.2 million for access to AOLs system, up nearly 38 percent over the same period last year. Advertising and online marketing revenues were $108.8 million, up from $58.2 million last year.

Advertisers and marketers are clamoring for access to AOLs growing subscriber base, the company said. Its backlog of advertising and commerce contracts rose $96 million in the quarter to about $320 million at year end.

America Online shares closed up $1.31 at $111.75 a share on the New York Stock Exchange in trading before the quarterly earnings were released.