America Online Inc recorded its first billion-dollar quarter in the third fiscal quarter, which ended March 31, although it was artificially boosted by the inclusion of Netscape Communications Corp’s revenues for the entire quarter, even though the acquisition did not close until March 17. However, the underlying AOL revenues managed to rise by 55% against the year-ago quarter, driven mainly by the addition 1.8 million members and the subsequent increase in subscription revenues, which rose 50% from a year ago.
AOL recorded third quarter net profits of $420m, after a pre-tax gain of $567m from the sale of both AOL’s and Netscape’s sale of shares in Excite Inc and charges related to the Netscape acquisition totaling $103m. That compares with a net loss in the same quarter last year of $78m. Ignoring the gain and charges, the company’s net income amounted to $117m, or $0.11 per share, which is two cents better than analyst estimates, as surveyed by First Call. This represents a 200% rise in net profits over the third quarter 1998. Third quarter net revenues jumped 65.5% to $1.25bn for the consolidated figures, and rose 55% to $1.09bn for AOL alone.
The 1.8 million new members took the total to 16.9 million by the end of the quarter – CompuServe seems forever stuck at 2 million members. Of the 18.9 million total, some 3.2 million are outside the US, but that proportion will probably grow as the company is due to launch in Hong Kong and Latin America in the summer. Subscription revenues for AOL alone grew 50% to $869m, while advertising and commerce revenues rose 77% to $220m. Average daily usage climbed to 55 minutes per day, compared to 46 minutes in the year-ago quarter. The company declined to give much guidance on its AOL Anywhere plans for expanding the service beyond the PC, but CEO Steve Case pointed to markets outside the US as more likely to be the first places the strategy is tested, as PC penetration is considerably lower than within the US. Still, Case also thinks his company is in a good position to benefit from the ever-decreasing price of PCs in the US. Cash and equivalents stood at $2.67bn at the end of the quarter.
