After a year spent overcoming regulatory hurdles, AOL Time Warner divulged Wednesday just how expensive a megamerger can be when it reported a loss of more than $1 billion for the fourth quarter and more than $4 billion for 2000. The losses, which were attributed to merger-related costs, represent combined figures for AOL and Time Warner had the companies been operating jointly last year. The two companies finalized their merger Jan. 11.
Despite the losses, execs were encouraged by healthy subscriber and revenue growth for the company's Internet and cable services. AOL revenue reached $2.06 billion for the quarter ended Dec. 31, up 27% from the previous year, with year-end revenue reaching $7.7 billion, a 35% increase over 1999. Cable revenue was $1.6 billion for the quarter and $6.1 billion for the year, both up 13% over last year. Publishing revenue was up as well, but incremental growth from movies, network television, and music was below expected levels.
During a presentation to investors and analysts, CEO Jerry Levin acknowledged that the strong growth on the AOL side will be the main driver of the company in the future. "AOL, for this company, is the crown jewel," Levin said. "This is a golden franchise that can be leveraged throughout Time Warner."
Advertising and commerce have emerged as the fastest-growing segments of the company's revenue stream, generating $686 million during the fourth quarter, up 71% from the same period in 1999. Overall, for 2000, AOL Time Warner reported a loss of $4.38 billion, or $1.02 a share, on revenue of $36.21 billion, compared with a loss of $2.45 billion, 60 cents, on revenue of $32.53 billion last year. Excluding interest, taxes, appreciation, and amortization, per-share earnings were 79 cents, down from $1.35 a year ago.