AOL a downer for AOLTW earnings

America Online Inc. continued to be a drag on revenue and profits for AOL Time
Warner Inc. in the second quarter, the company reported Wednesday.

Companywide revenues were up 6% to $10.8 billion, led by gains at the filmed-entertainment, networks and cable units.

AOL revenues were down 6% to $2.1 billion.

Operating income was down 15% to $1.3 billion, with AOL, networks and
publishing posting declines.

Filmed entertainment was the big gainer, up 24% to $407 million, while cable
profits were up 11% to $752 million.

Network advertising was up 17% in the quarter, including a 16% increase at
the Turner Broadcasting System Inc. networks and a 23% gain at The WB Television Network.

The company reported second-quarter write-downs of $364 million (and $945
million for the first six months) on bad investments (AOL Japan and NTV-Germany
among them) showing "other-than-temporary" declines.

The company said that both the Securities and Exchange Commission and the
Department of Justice continue to investigate "a range of transactions
principally involving" AOL.

Recently, the SEC concluded that AOL
incorrectly allocated $400 million paid to it by Bertelsmann AG as advertising,
although the company said it disagreed with that conclusion.

During a conference call, company officials said they continue to mull a
possible spinoff of Time Warner Cable, although nothing is imminent and an
initial public offering wouldn’t occur (if it does at all) before the SEC and
DOJ investigations are resolved.