America Online posted one of the biggest losses in its history last week, despite showing strong revenue growth and a steadily expanding subscriber base.
The losses for the company's fiscal fourth quarter, ending 30 June, were due to complex accounting changes forced on the company by US federal regulators.
AOL's fourth-quarter loss was $11.8 million (#7.5 million) or 12 cents a share, compared with a profit of $16.1 million or 14 cents a share for the same period last year. The company would have posted a net income of $10.9 million or 9 cents per share, but "timing adjustments" made after instructions from the US Securities and Exchange Commission (SEC) forced the company to move a $25.7 million charge from the fiscal second quarter into the fourth. The SEC also advised AOL to "hold off" recording #7 million from a third-quarter marketing deal and spread the figure over a 40-month period.
Steve Case, AOL's chairman and CEO, was keen to explain the unusual circumstances surrounding the company's results. "It is important to note that the accounting changes we are making reflect timing issues, which do not impact AOL's strong operating momentum," he said. "We have substantially built AOL's base of deferred revenues, which will contribute to future profits. We believed that our previously reported results were in accordance with generally accepted accounting principles, but we have agreed to comply with the advice from the staff of the SEC."
Despite the company's loss it added 600,000 new members, bringing its total subscriber base to 8.6 million worldwide as of 30 June this year.
Meanwhile Prodigy, America Online's smaller rival in the US, dumped its money-losing networking operation last week and hired SplitRock Services, a network maintenance company, to deal with all future connections.
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