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"My focus as CEO is going to be building value over time. There is too much focus on quarter-to-quarter results and not enough focus on long-term value creation."
——Richard Parsons

YOU'VE GOT NET LOSS!

AOLTW's Q4 Net Loss Is a Punishing
But Not Unexpected $1.82 Billion
It sure seemed like a good idea at the time. Unfortunately, times have changed.

AOL Time Warner's Q4 net loss was $1.82 billion, or 41 cents a share, in large part due to an expected $1.7 billion write down of investments, compared to a net loss of $1.09 billion, or 25 cents a share, last year. Shares of the company dropped 8.6% to close at $24.40, its lowest mark since December 1998.

AOLTW said its EBITDA rose 14% to $2.76 billion in the quarter. For the year, it rose 18% to $9.91 billion, while revenue was up 6% to $38.23 billion, which fell short of the targets of $11 million EBITDA and $40 billion in revenues that were set just after AOL bought Time Warner in early 2001; not surprisingly, those numbers were revised downward earlier this month.

The company did say its fourth-quarter earnings would rise to 33 cents a share from 28 cents a year earlier before amortization of goodwill and charges. Q4 revenues rose 4% to $10.63 billion, boosted by strong subscriptions at AOL and cable units.

A prolonged slump in ad spending was cited as the chief reason the company fell short of its earlier, more positive predictions. The results were in line with AOLTW's own lowered outlook announced earlier this month.

Warner Music Group's EBITDA decreased 15% in the quarter due to higher bad debt provisions reflecting a "difficult industry-wide retail environment, lower sales and unfavorable foreign currency exchange rate fluctuations." In the U.S., WMG improved label revenues in the fourth quarter by 2%, and increased marketshare, coming in second for the year in total industry sales thanks to such hit acts as Linkin Park, Enya, Staind and Madonna.

Richard Parsons, who will succeed retiring Chief Executive Gerald Levin in May, blamed the recession and events of Sept. 11 for the company's falling short of its original targets. "But no other media company that had substantial reliance on advertising came close to the results we achieved.

"My focus as CEO is going to be building value over time. There is too much focus on quarter-to-quarter results and not enough focus on long-term value creation. I don't plan to make that mistake."

The company reiterated its 2002 outlook of 5-8% growth in revenues and 8-12% growth in cash flow.

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