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UPDATE 3-AOL swings to quarterly profit on patent sale
July 25, 2012 / 4:05 PM / 5 years ago

UPDATE 3-AOL swings to quarterly profit on patent sale

(Adds executive comment, share price)

* Earns $10.17 a share in Q2 vs year-ago loss of 11 cents

* Total revenue fell 2 pct but beats Wall Street estimates

* Shares up more than 5 pct

By Jennifer Saba

July 25 (Reuters) - The sale of its patents to Microsoft Corp helped AOL Inc swing to a profit in the second quarter from a loss a year ago.

The company reported second quarter net income on Wednesday of $970.8 million, or $10.17 per share, following a net loss a year earlier of $11.8 million, or 11 cents per share.

It was the first time in four years that AOL reported growth in operating income before depreciation and amortization (OIBDA)and the company raised its full-year adjusted OIBDA outlook by $25 million to $375 million.

“On the top line, it’s better than expected,” said Ron Josey, an analyst with Think Equity. “We actually think it shows encouraging signs.”

Shares of AOL climbed more than 5 percent in midday trading,

adding $1.53 to $29.02 on the New York Stock Exchange.

In recent months, the company has been aggressively giving back to investors. AOL won a bitter proxy battle against activist hedge fund Starboard Value and has pledged to give the entire proceeds of its $1 billion patent sale to Microsoft back to shareholders.

Total revenue fell 2 percent to $531.1 million, but beat analysts’ expectations of $519.4 million, according to Thomson Reuters I/B/E/S.

AOL CEO Tim Armstrong said in an interview with Reuters the quarterly results were a “stepping stone to revenue growth and profit growth.”

Still, AOL is having problems gaining traction in a key area for the company - display advertising.

While advertising revenue increased 6 percent it was mainly due to ad sales in the United Kingdom and Canada and from its third party ad network platform

Revenue for display ads in the United States was flat, underscoring the challenge it faces as it seeks marketers to buy big, pricey ads that appear on web pages. In the previous quarter, display advertising revenue fell 1 percent in the U.S.

In the U.S., online advertising spending in the second quarter increased almost 24 percent, according to research firm eMarketer.

Armstrong said a reorganization of the sales team and an emphasis on video and its premium ad format called Project Devil should kick start U.S. online ad growth for the remainder of the year.

Excluding income from patent licensing and sales, costs related to the proxy battle and patent sales, and expenses associated with settling a state tax matter, AOL reported earnings of 13 cents per share. Analysts expected 10 cents, according to I/B/E/S. (Reporting by Jennifer Saba in New York and Sayantani Ghosh in Bangalore; Editing by Bernadette Baum)

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