AOL ad sales boost third-quarter profit

By Jennifer Saba

Tue Nov 6, 2012 10:35am EST

n">(Reuters) - AOL Inc (AOL.N) reported higher-than-expected revenue and profit on the strongest advertising growth the company has seen in seven years.

AOL said on Tuesday that third-quarter revenue was flat at $531.7 million, ahead of analysts' average estimate of $521.6 million, according to Thomson Reuters I/B/E/S.

Advertising revenue rose 7 percent to $340 million, while subscription revenue for AOL's dial-up services fell 10 percent to $173.5 million.

Subscription revenue had its lowest rate of decline in six years.

AOL shares rose 11 percent to $39.61 in morning trade.

"Things look great," RBC Capital Markets analyst Andre Sequin said. "This company is continuing to make steps in the right direction."

These trends are helping AOL since its turnaround hinges on the success of getting more online advertising dollars and reducing its reliance on the lucrative but moribund dial-up business.

AOL Chief Executive Tim Armstrong said in an interview with Reuters that the main focus next year will be to focus on advertising and video, which tends to command higher prices from marketers.

Still, there are troubling signs in the results. Domestic display advertising, where AOL is making a big effort, including splashy acquisitions such as the Huffington Post, fell 3 percent in the quarter.

That compares with the overall U.S. display ad market estimated to grow more than 20 percent to $14.98 billion, according to research firm eMarketer.

AOL's advertising revenue was lifted by search revenue and double-digit growth in third-party network revenue.

Display ads are big, pricey units on Web pages favored by brand advertisers. Third-party network consists of AOL's Ad.com, which helps sell ads across other properties. These types of ads typically are lower-cost than those ads known in the industry as premium display.

"We weren't exactly 100 percent drilled and focused on the advertising strategy the first half of the year. But we are now," Armstrong said on a call with analysts.

"I think overall, what you're going to see is an operational improvement around advertising as we get into 2013."

The company, however, has taken a number of steps over the year, including selling some of its patents to Microsoft (MSFT.O) for $1 billion and returning those proceeds to shareholders.

Shares are up 137 percent year-to-date.

Net income was $20.8 million, or 22 cents per share, compared with a year-earlier loss of $2.6 million, or 2 cents per share.

AOL's third-quarter EPS of 22 cents was well ahead of analysts' forecast of 17 cents.

The company raised its estimate for 2012 adjusted OIBDA to about $400 million from $375 million.

(Reporting by Jennifer Saba in New York; Editing by Lisa Von Ahn, Maureen Bavdek, Sofina Mirza-Reid and Dale Hudson)

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Chevron profit drops on lower oil output, maintenance

By Braden Reddall

Fri Nov 2, 2012 10:03am EDT

n">(Reuters) - Chevron Corp posted much lower-than-expected quarterly earnings on Friday as maintenance exacerbated a steady decline in oil and natural gas production and as a huge fire at one of the company's California plants hit the refining business.

Shares of the second-largest U.S. oil company fell more than 1 percent in early trading.

Increasing output has been a struggle for many big oil companies, including Exxon Mobil Corp and Royal Dutch Shell Plc. With oil and gas assets tightly controlled by the countries where they are located, the majors are left to drill in pricier regions on land and offshore.

Chevron's third-quarter oil and gas production fell to 2.52 million barrels of oil equivalent per day from 2.60 million bpd a year earlier. On quarter-to-quarter basis, the production number declined for the third period in a row.

Net income in the quarter fell to $5.25 billion, or $2.69 per share, from $7.83 billion, or $3.92 per share, a year earlier.

Earnings dropped 17 percent to $5.1 billion in the oil and gas production business and plunged 65 percent to $689 million in the refining, or downstream, operation.

"Downstream was the primary culprit behind the miss," Simmons & Co analysts said in a note to investors. The reported profit included about $600 million from an asset sale gain, offset by a negative foreign exchange impact, they said.

Leaving out certain items, Chevron earned $2.55 per share, compared with the analysts' average estimate of $2.83, according to Thomson Reuters I/B/E/S.

Chief Executive Officer John Watson said the earnings were weighed down by heavy planned oilfield maintenance. Pricing for the company's output was also weaker, in part because of the now-oversupplied U.S. market for natural gas liquids. The quarter's average Brent oil price of $110 per barrel was down $2 from a year earlier.

A storm cut into Gulf of Mexico production, while planned maintenance in Kazakhstan and the United Kingdom caused the majority of the production decline outside the United States, according to Chevron.

The company had already warned last month that the crude unit at its oldest refinery in Richmond, California, would remain offline through the fourth quarter after it was badly damaged in an August 6 fire.

Shares of Chevron were down 1.2 percent at $110.10 in early trading on the New York Stock Exchange.

(Reporting by Braden Reddall in San Francisco; Editing by Gerald E. McCormick and Lisa Von Ahn)

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