AOL Profits Up In 2nd Quarter

AOL Time Warner building Rockefeller Center
AOL Time Warner, the world's largest media company, posted sharply higher second-quarter profits of $1.06 billion Wednesday, but reported more bad news at its troubled
Internet division.

The company's Internet arm lost 846,000 subscribers in the quarter, substantially more than analysts were expecting, as it trimmed out non-paying customers in an effort to boost profitability. The Internet division posted a decline of 23 percent in operating income.

The company also said that a share offering of its cable TV division could be delayed after the Securities and Exchange Commission found problems with its accounting of two deals with German media giant Bertelsmann.

AOL Time Warner, whose vast holdings include Warner Bros., HBO and CNN, said it stands by its accounting of the two deals, and the SEC has taken no action on the matter. The SEC is still investigating other transactions at AOL.

The profits included several one-time factors, including the company's sale of its 50 percent stake in the Comedy Central cable channel to Viacom. They also included a gain of $760 million related to a settlement with Microsoft over Internet browsers.

Chief executive Richard Parsons said the results "give us confidence that we can deliver on all of our 2003 financial objectives." He said the company would continue to focus on reducing its debt, which stood at $24.2 billion at the end of the quarter, compared with $26.3 billion as of March 31.

America Online is still the world's largest Internet service provider with 25.3 million U.S. subscribers, but its numbers have slipped for three straight quarters.

The company's stock fell in heavy trading following the report. The stock had been up 29 percent since the beginning of the year.

By Seth Sutel