At AOL, a bad thing is going to get a lot worse before it gets better.
Tuesday morning, just before
AOL Time Warner's
scheduled meeting with analysts to discuss the strategy and prospects for its troubled America Online division, the company issued preliminary guidance for the online operation for 2003. And it doesn't look good.
AOL says advertising and commerce revenue will fall 40% to 50% in 2003 at the online unit because of "lower revenue recognition from prior-period commitments." Despite "solid" growth in worldwide subscription revenue, overall revenue at the unit will be roughly unchanged from 2002.
With the decline in high-margin advertising and commerce revenue, the company said that it expects EBITDA to decrease 15% to 25% year over year.
The shares were off 4% to $15.85 in the Instinet premarket.
At the parent company level, AOL Time Warner expects 2002 earnings before interest, taxes, depreciation and amortization to be at the low end of its previous estimates of a 5% to 9% rise from 2001, while revenue will rise 5% to 8%, it said.