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America Online, Inc. (NYSE: AOL) fell 6.72 to 42.24 on Monday after merger partner Time Warner, Inc. warned of weak fourth-quarter results.
Time Warner said it will take a charge of US$20 million to $40 million in the quarter to pay for the restructuring of an agreement with Road Runner, a high-speed Internet service provider.
The restructuring, part of an agreement with the U.S. Justice Department in connection with Time Warner's acquisition of Media One Group, calls for Time Warner Cable to increase its ownership in Road Runner and manage the Internet service's operations.
The plan also clears the way for Time Warner Cable to offer multiple Internet services over its cable lines.
Time Warner said its fourth-quarter results will also be hurt by the "disappointing box-office performance" of the Adam Sandler film "Little Nicky," as well as weak cable advertising revenue and slower-than-anticipated music sales.
As a result, the company said, earnings before income taxes and other items for the year as a whole will grow at a rate of about 11 percent, instead of the 12 to 13 percent previously thought. Management remains "comfortable" that the company will see annual growth in total advertising revenue in the "mid-teens," Time Warner said.
AOL, for its part, said its businesses are "on track to post record growth in the December quarter, with strong momentum in both membership growth and advertising/commerce revenues." Advertising and commerce revenue will be in line with analysts' expectations, AOL said.
AOL's membership recently passed the 26 million mark, with the company
claiming strong growth in the United States and Europe. December 10th marked the
second-best day ever for net new membership growth in the U.S., with about
40,000 new AOLers signing up that day.
