AOL Climbs After Quarterly Profit More Than Doubles

AOL Inc., the Internet company spun off from Time Warner Inc., advanced in New York trading after saying third-quarter profit more than doubled and predicting industry-level growth in U.S. display-ad sales next year.

Net income climbed to $171.6 million, or $1.60 a share, bolstered by gains on asset sales, New York-based AOL said today in a statement. Sales fell 26 percent to $563.5 million, topping the $558.1 million average of analysts’ estimates.

Chief Executive Officer Tim Armstrong said he intends to match industry growth rates for domestic display advertising of 7 percent to 13 percent in the second half of next year. He’s trying to reignite ad sales growth with the acquisition of news blog TechCrunch Inc., a new search deal with Google Inc. and the creation of 500 local-news websites by year-end.

At the beginning of the third quarter, “we had a choice of how fast to push the recovery,” Armstrong said on a conference call. “We made a big decision to kind of jump out of bed, put on our sweats and head straight to the gym and the track to start a fairly intense rehab and training program.”

AOL climbed 81 cents, or 3.2 percent, to $26.10 at 4 p.m. in New York Stock Exchange composite trading. The shares have increased 12 percent this year. AOL was spun off from Time Warner in December.

Excluding some items, third-quarter profit was 83 cents, according to John Blackledge, a Credit Suisse analyst. That topped the 49-cent average of 11 analysts’ estimates compiled by Bloomberg. Net income rose from $74 million, or 70 cents a share, a year ago because of gains from the sales of investments in Kayak and ICQ, AOL said.

Yahoo Potential?

U.S. display ads dropped 7.6 percent, in line with the 8 percent decline estimated by Blackledge. That follows drops of 6.7 percent in the second quarter and 9.7 percent in the first quarter.

Last month, Yahoo! Inc. was working with Goldman Sachs Group Inc. to help defend against possible takeover approaches, people familiar with the matter said at the time. AOL had talked with private-equity funds including Silver Lake about a possible bid, said the people, who asked not to be identified because the talks were private.

The preliminary discussions between AOL and the private- equity firms focused on a possible purchase of parts of Yahoo, the people said then. Neither AOL nor the private-equity companies had made a proposal to Yahoo, they said.

Armstrong said in an interview today that a deal to cooperate with a company like Yahoo may make sense, though he wouldn’t comment specifically on reports that AOL could combine with Yahoo.

TechCrunch Acquisition

“In general we are always looking for opportunities to put our execution and strategy on more traffic -- not in relation to Yahoo but just in general,” Armstrong said. “People see our strategy and where we’re going and I think it’s a natural, no- brainer that you would eventually try to put more traffic under our strategy.”

In addition to TechCrunch, AOL also acquired 5Min Media, a network of online videos, and Things Lab Inc., a creator of social-networking tools, in a bid to restore lost relevance and revenue growth.

AOL disclosed today that it spent $97.1 million on the three acquisitions and an additional $23.1 million in compensation during the next three years.

AOL signed a five-year search advertising deal with Google in September, expanding their partnership to mobile search and the placement of AOL videos on YouTube.

To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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