Market Overview

AOL Sales Still in Decline, but the Slide is not as Steep


AOL (NYSE: AOL) is in decline and that might not change for some time, but Wednesday saw them sitting on a kid's slide rather than freefalling from a high-board. So the question is, should AOL celebrate the fact that they are still doing badly, just not as badly as they were last year.

Surely bad is bad. There is nothing to celebrate here, but there is reason to be a little, just a little, bit hopeful. Those green shoots of recovery take time turning into strong plants, and AOL's shoots are barely visible right now. But they are there.

According to CNN, AOL's 4Q earnings of 23 cents per share beat estimates, even though they are 66 percent worse than last year. Revenue fell 3 percent to $576.8 million for the quarter that ended when the year ended.

But the bad news does not end there. AOL posted declines for FY11, but also noted that 2011 marked its lowest rate of revenue decline in five years. Investors helped pop shares up 13 percent after seeing that little news nugget.

AOL's biggest smiles will come from looking at the numbers relating to the advertising sector. Ad revenue shot up to $368.8 million, up 10 percent from FY10. That includes revenue for banner ads and other display ads rose 15 percent for the fourth consecutive quarter.

"The operational and structural changes we have made over the past two years are making a difference," said CEO Tim Armstrong.

Armstrong is correct, those structural changes are making a difference, but are they making enough of a difference? AOL has spent a lot of time bringing the Huffington Post into the fold and that has helped change AOL into a different sort of company to how it was previously perceived.

The financial rewards for brave steps like those may well take a long time to become apparent, if they ever happen at all. But for now, AOL should be pleased, not delighted, that the brakes seem to have been put on the downhill bobsled, and that there are a few hints ion the new report that the company's decline might actually not be as terminal as previously though.

For now, after recent years, that probably is something to celebrate.

Posted-In: Earnings News Best of Benzinga


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