AOL posts profit, but subscribers dwindle

AOL Inc posted a quarterly profit and beat Wall Street's revenue expectations, even though the weak advertising market and the Internet company's dwindling subscriber base

AOL, which became an independent company once again in December after former parent Time Warner Inc spun it off, said net income for the fourth quarter was $1.4 million (£878,000).

This compares with a loss of $1.9 billion (£1.2 billion), or $18.52 a share, a year ago when the company took a $2.2 billion (£1.38 billion) charge.

The latest quarter's earnings were hit by restructuring and other costs of around $110 million (£69 million), or 70 cents per share.

Revenue fell 17 per cent to $809.7 million (£508 million) as it lost subscribers in its dial-up access business, and earned less revenue per search query in its online advertising business.

Wall Street analysts were expecting AOL to earn revenue of $763.5 million (£479 million), according to Thomson Reuters I/B/E/S.

Credit Suisse analyst John Blackhedge said in a research note that the results were "encouraging" for AOL's new management, but added that the company's performance in 2010 would be key to its turnaround story. Blackhedge has an "underperform" rating on AOL.

AOL hired its Chief Executive Tim Armstrong from Google Inc to rebuild the company around its online content and advertising business.

AOL's shares rose 75 cents in premarket trading after closing on Tuesday at $24.65 on the New York Stock Exchange.