All posts by wy163828

About wy163828

NO-CARD

AOL: A Hard Time in Transformation of Business

Weijia Yan (Jennifer)

 

According to a latest article from Financial Times1, AOL is experiencing big operational changes and seeking new partners that would “make operational and financial improvements to the company”. It is not a pleasant time for AOL in such a transformation, though.

Let’s take a look at the latest financial performance2 of AOL. The revenue in the third quarter this year was increased by 6%, which was actually beyond the market’s expectation. However, according to the analysis of this article, the author claims that this increase was caused by a 14% increase in advertisement. Yes, AOL has always been quite good at using marketing strategy to pull over its revenues in its long history. Then, we move on to look at AOL’s subscription business, which generates the majority of the revenues. It dropped by 7% in the third quarter. Furthermore, we may notice that AOL’s operating income dropped by 61% to $61.7 million in the third quarter compared with number in the same year-earlier period. Such a huge decrease was mainly caused by a $19 million pre-tax restructuring and $25 million impairment, both tied to AOL’s network of local sites Patch. Even Patch has brought so huge a loss to AOL, AOL does not show any intentions to sell Patch out to others “at current moment”. Therefore, AOL’s management is under pressure in recent days because investors haven’t seen any improvements for its profitability so far.

But change may not be a bad thing at all. As AOL’s CEO Tim Armstrong said, AOL was on a track to meet those expectations via operational changes and partnerships. Negotiation is under way and both sides have not reached a confirmed result yet. Investors still have hope in AOL, which we can tell from its recent stock price trend.

 

 

Reference:

 

  1. AOL Feels Pressure to Hit Profitability at Patch Network, Emily Steel, New York, Financial Times, November 5, 2013.

http://www.ft.com/intl/cms/s/0/2b63b708-463b-11e3-b495-00144feabdc0.html?siteedition=intl#axzz2k1VS2yyC

 

  1. The earnings release of AOL for third quarter 2013.

http://ir.aol.com/phoenix.zhtml?c=147895&p=quarterlyearnings