The Telegraph
Since 1st March, 1999
Email This Page
AOL Time Warner awash with red
- Media major suffers nearly $ 100 billion loss

New York, Jan. 30 (Reuters): AOL Time Warner Inc. on Wednesday posted a 2002 net loss of nearly $ 100 billion — the largest annual loss in US corporate history — and in a sign of further turmoil, media mogul Ted Turner said he would step down as vice-chairman.

The world’s largest media company took a whopping $ 45.5 billion fourth-quarter charge to write down the value of its embattled America Online unit, as well as its cable operations and other assets, more than double what analysts had expected.

The charge reflects the loss in value of the company created in a once-heralded deal marrying old and new media that is now widely seen as a failure.

Turner, 64, said he was stepping down to devote more time to his philanthropic and other interests. A spokeswoman said CEO Richard Parsons expected AOL’s largest individual investor would stay on the board, but the issue will be discussed soon.

The New York-based company, already reeling from the recent departure of chairman Steve Case, CNN head Walter Isaacson and federal probes into accounting practices at its online unit, reported a fourth-quarter net loss of $ 44.9 billion, or $ 10.04 a share. That compared to a year-ago loss of $ 1.8 billion, or 41 cents a share.

It posted a full-year 2002 net loss of $ 98.7 billion, about the same as the gross domestic product of Egypt and double that of New Zealand.

“They tried to put a nice face on this $ 44.5 billion write down but we are talking about a $ 100 billion in a year; this is not chopped liver. It still hurts the company’s credibility,” said Hal Vogel, head of Vogel Capital Management.

AOL Time Warner said it had renegotiated its credit line and said the goodwill charge would not impact its liquidity or debt covenants.

While analysts said overall operating numbers came in near expectations for most units, some were taken aback at the size of the non-cash charge — which came on top of a $ 54 billion charge AOL took in the first quarter — and its 2003 outlook.

“We think 2003 will be a challenging year,” Parsons said on a call with analysts, trying to “reset” expectations.

He said the company — home to HBO, Faith Hill, People magazine and ‘Friends’ — expects mid-single digit growth in revenues in 2003 and essentially flat earnings before interest, taxes, depreciation and amortization, a key cash flow metric, due to lower advertising and less favourable comparisons.

“There isn’t going to be any growth in EBITDA in 2003 and I have some questions about 2004 and they still have this mountain of debt they are trying to grapple with,” Vogel said.

Most on Wall Street were expecting a non-cash charge of up to $ 20 billion. Some found a bit of comfort that the company’s debt covenants were not affected and executives addressed plans to trim its $ 25.8 billion net debt load.

The company said revenue in the quarter grew 8 percent to $ 11.4 billion and EBITDA rose 16 per cent to $ 2.8 billion. It posted earnings before a range of items of 28 cents a share, compared to 26 cents a year-ago.

Strength in the company’s film/entertainment business, with hits like the ‘Lord of the Rings’ sequel, and cable networks offset weakness in the fourth quarter at America Online.

Shares of AOL fell to $ 12.53 in after-hours trade on Instinet, after closing at $ 13.96 in regular New York Stock Exchange trade, but analysts expected it to recover.

“Obviously the turnaround is taking a little longer than I thought I’d like to see but that is the reality,” said John Tinker of Blaylock & Partners. “The stock has started to recover (since this fall) as people view the company as a giant battleship slowing trying to right itself.” The quarter capped a tumultuous year that saw a change in top management about two years after AOL completed its $ 106.2 billion purchase of Time Warner.

Email This Page