AOL CEO Confident About Shareholder Showdown Amid Higher Profit

Tim Armstrong - AOL Buys Huffington Post conference - 2011
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Tim Armstrong said he doesn't expect a near-term resolution of a dispute with fund Starboard, but he expects TV ad dollars to increasingly flow to the Web.

AOL said Wednesday that its first-quarter earnings multiplied despite a slight revenue decline.

The online company's chairman and CEO Tim Armstrong told a conference call that while he wasn't happy about a display advertising decline, he sees positive momentum in AOL's business that will also help the firm in a continued showdown with dissident shareholder Starboard. The fund has called Armstrong's focus on content a strategic mistake and threatened to let shareholders vote on its own lineup of board members.

Armstrong said his team has not held discussions with Starboard. "A resolution would be great, but I don't see it on the horizon," he said. He added that he solid latest financials give him confidence in his position and AOL's trends. Armstrong said Starboard and his team agree on the need to create shareholder value, but AOL's focus is both on long- and short-term benefits, while the fund seems focused mostly on short-term value.

In a nod to the fund though AOL said it would return all money from a recent patent deal worth $1.1 billion to shareholders.

Management also said Wednesday that operating income before depreciation and amortization should turn the corner this year and return to growth in 2013. And Armstrong predicted that TV advertising dollars would in the coming years increasingly flow to the Web. Online companies have been holding digital versions of TV networks' upfront presentations to highlight their content and ad opportunities as alternatives to traditional TV.

AOL on Wednesday posted a profit of $21.1 million for the first quarter. That compared with $4.7 million in the year-ago period when the company had higher restructuring costs of $27.8 million, compared with $7.4 million in the latest period.

Adjusted operating income before depreciation and amortization declined 5 percent to $93. 8 million. Revenue declined 4 percent to $529.4 million. However, advertising revenue rose for the fourth consecutive quarter in a row, bringing in a gain of 5 percent.

Based on the figures, AOL raised its full-year guidance for operating income before depreciation and amortization.

“AOL is a much stronger company today than a year ago and began 2012 by growing advertising revenue, lowering expenses and improving adjusted OIBDA trends," said Armstrong. "In 2012 and beyond we are simultaneously focused on the continued successful execution of our strategy and on creating and unlocking value for our shareholders.”

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