AOLTW cuts AOL's 2002 revenue expectations

ITworld.com –

Media and entertainment conglomerate AOL Time Warner Inc. (AOLTW) cut the 2002 full-year earnings expectations for its AOL Internet unit Monday, claiming continued softness in the unit's advertising business.

The announcement comes as AOLTW faces dual government investigations by the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ) over alleged financial shenanigans in financial reporting for the AOL unit.

AOLTW lowered AOL's expectations, saying that its full-year 2002 advertising and commerce revenues are "tracking" to US$1.7 billion, "with an additional 5 percent downside risk." Previously, the company had estimated that the Internet unit would pull in $1.8 billion.

Additionally, AOL's earnings before interest, taxes, depreciation and amortization (EBITDA) for the full-year are expected to come in at between $1.7 billion and $1.8 billion, AOLTW said.

However, the New York conglomerate reaffirmed that it was on track for its overall full-year results, stating that EBITDA growth will land at the low end of the previously announced 5 percent to 9 percent range, with full-year revenue growth in the 5 percent to 8 percent range.

For the third quarter, AOLTW expects revenue growth in the mid-single digits and EBITDA growth to rank in the low-single digits compared to the same quarter last year.

AOLTW's financial results are under particular scrutiny lately amid accusations that the company conducted a series of unusual deals to prop up the performance of its sagging Internet unit. On top of dealing with the investigations, the company has undergone a round of restructuring and executive changes in an effort to shore up its AOL business amid a drifting advertising market.

However, its financial forthrightness appeared to bode well with investors Monday, as the company's stock (AOL) jumped 8.42 percent to $13.13 a share following release of the revised expectations.

The company has yet to disclose when it will release its third-quarter results.

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