Article Abstract:
America Online's (AOL) fiscal 4th qtr 1998 operating income exceeded investors's projections, but postponed its net income report because of problems determining the amount of special charges. The online service provider said ongoing talks with the SEC regard in-process research and development charges stemming from its recent acquisitions of Mirablis and NetChannel. Operating income amounted to $57.3 million, or 23 cents a diluted share. The report totaled a more than tenfold increase over the 4th qtr 1997 performance of $5.6 million, or 3 cents a share. It also topped a First Call survey of analysts that had forecast operating income of around 19 cents a share. CEO Steve Case praised the performance, noting strong customer growth of 665,000 to a total of 12.5 million despite reduced marketing. Revenue surged 67% to $792.3 million in the 4th qtr 1998, compared to $475.7 million in the 4th qtr 1997.
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Article Abstract:
AOL is changing its pricing policy for electronic retailers from collecting a percentage of earnings to charging them rent to lease a space on AOL's network. The Internet service provider explains the move by claiming years of experience with electronic commerce, the company has learned that commissions are not the most affective way to increase merchant's sales. AOL believes that when ISPs collect commissions rather than rent, there is no incentive for the merchant to succeed, rather they use their sites as experiments. For AOL the new plan will guarantee revenue that is paid regularly and subject to the variables of commission. This is important for the ISP, which needs to bring in revenue from other sources than its member-access fees.
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Article Abstract:
The greatest threat to AOL's online service network potentially comes from the growth in cable modem services because of the speed that broadband technology offers. AOL is seeking to address consumer demand for faster service by forging agreements with Bell regional telephone companies to get access to their fast DSL networks. The Bells are creating the DSL infrastructure for their own ISP services, but AOL is offering to create a national DSL system in which profits would be shared. The move is seen as a counter to AT&T's purchase of MediaOne, which opens the possibility for cable modems to be integrated with telephone networks.
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