AOL losses to top $1bn due to writedown

 
City A.M. Reporter
AOL yesterday posted a major loss in the second quarter due to a goodwill impairment charge related to its sale of social networking site Bebo and a precipitous drop in advertising revenue.

The company warned in a regulatory filing that it expects total revenue and operating income to decline for the foreseeable future as it continues to restructure its advertising business.

AOL’s revenue fell 26 per cent to $584.1m (£367.6m) as advertising declined on all fronts as did its dial-up subscription fees. Analysts had on average been expecting revenue to come in around $602.1m. Advertising revenue declined 27 per cent to $260.2m.

AOL chief executive Tim Armstrong remained bullish about the prospects of the company despite the weak display advertising numbers, a key plank of his management team’s strategy.

“I would expect us in 2011 to start getting on a very stable ground and track record of growth,” he said.

Net loss during the quarter was $1.06bn, or $9.89 a share, compared with a profit of $90.7m, or 86 cents a share a year ago.

AOL recorded a goodwill impairment charge of $1.4bn during the quarter following a goodwill impairment charge test. The company’s net assets had increased due to a significant deferred tax asset following its sale of Bebo, which had coincided with a decline in its share price.

AOL sold Bebo to Criterion Capital Partners for around $10m June, just two years after it had paid $850m for it.