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AOL Profits Fall 58%

Spun-off Internet company struggles during first quarter

Tim Armstrong is trying to transform AOL from a ubiquitous dial-up service to a Web content company — and the pains of transition are showing up in its quarterly earnings.

AOL Inc. said on Wednesday that profits fell more than 58 percent during the first quarter as the spun off Internet company struggled to sell ads.

Net income was $34.7 million, or 32 cents a share, compared to $82.7 million, or 78 cents, during the same period last year. Revenues fell 23 percent to $664.3 million.

The results fell short of Wall Street estimates, as analysts were expecting the company to post net income of 69 cents per share and $679 million in revenue, according to Thomson Reuters.

AOL also said it plans to sell ICQ, its instant messaging service, to a company called Digital Sky Technologies for $187.5 million.

Armstrong, AOL’s CEO, also said the company may sell Bebo, its social-networking site, too. AOL bought Bebo for $850 million in 2008.

In the meantime, Armstrong is focused on turning the company around.

"AOL continues to make progress against our long-term objective of becoming an internet growth company. Our results highlight the accomplishment of our first goal in AOL’s turnaround which was to significantly reduce AOL’s cost structure," Armstrong said. "While our restructuring had an impact on Q1 advertising results, we are encouraged by the advertising market’s recent strength. We are now entering the second phase of AOL’s plan which is to greatly improve the consumer experience, scale the advertising systems and teams, and aggressively pursue our strategy in the marketplace."

AOL was spun off by Time Warner in December.

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