Viacom had a bullish outlook as it posted the best second quarter in its history while AOL Time Warner was downbeat. AOL posted improved results in the shadow of large subscriber drops at America Online and a federal probe that will delay a cable asset spin-off it needs to reduce its crushing debt load.
AOL posted net income of $1.06 billion in the quarter, up from $396 million in the year-ago period, helped by gains from asset sales. Factoring out one-time items, operating income was up 6% year over year.
Revenue rose 6% to $10.8 billion, led by increased ad revenue in broadcast TV. Cable revenue increased 9% and TV network revenue increased 10%, thanks to a 16% increase in ad revenue. AOL's publishing unit eked out a 2% increase in ad revenue for the quarter.
The America Online unit remains a weak spot, posting a 6% decrease in revenue. The service lost 846,000 subscribers during the quarter and a probe of its accounting by the Securities and Exchange Commission will delay a planned initial public offering of AOL's cable systems. CEO Richard Parsons said AOL's plan to reduce debt-which totaled $24.2 billion at the end of the quarter-is still on target, even without the spin-off.
Viacom, parent of CBS and MTV, posted net income of $659.6 million for the quarter, up 20.7% over the year-ago period. Revenue rose 10% to $6.42 billion, with cable, network TV, outdoor and video revenues offsetting weakness in radio.
Advertising revenue rose 11% in the quarter, with cable up 31% and broadcast and outdoor both up 9%. Radio revenue dropped 3% year-over-year, but was up 8% in June and is ahead of last year in July, said President-Chief Operating Officer Mel Karmazin.
"In a difficult economic time, complicated by the war in Iraq, we continued to execute extraordinarily," Mr. Karmazin said. The outlook for the second half remains strong, he said, with radio expected to continue to improve, and strong upfront sales promising high ad revenue in the latter part of the year.
uncertain second half
AOL's forecast was glum. The second half remains uncertain, with AOL's film and TV units faced with tougher comparison, said Chief Financial Officer Wayne Pace. The TV unit is still going strong into the third quarter, but the company is only "cautiously optimistic" due to the uncertainty around the economy, while the magazine unit is expected to show single-digit growth in the third quarter, but is also faced with limited visibility.
"There appears to be enough uncertainty remaining in the year to keep us from being even more optimistic," Mr. Parsons said.