AOL profit drops as revenue dips, costs grow

NEW YORK - AOL Inc. (AOL) reported sharply lower fourth-quarter net income on Wednesday, hurt by a dip in total revenue and higher costs. Its net income the year before was also boosted by a gain on the sale of an investment.

But the company's ad revenue rose 10 percent, its third straight quarter of year-over year growth. A Web pioneer back in the '90s, the Internet company has been working on turning its business around as demand for its dial-up Internet access service shrinks.

Shares rose 79 cents, or 4.9 percent, to $17 in premarket trading. AOL posted net income of $22.8 million, or 23 cents per share, in the three months ended Dec. 31, down 66 percent from $66.2 million, or 61 cents per share, in the same period a year earlier.

Analysts polled by FactSet were expecting earnings of 16 cents per share, on average.

Revenue fell 3 percent to $576.8million, still topping analysts' prediction of $573.1 million, from $596 million.

Advertising revenue increased 10 percent to $363.8 million. Its subscription revenue - money from its fading dial-up Internet service - declined 18 percent to $194.6 million.

The company's costs grew, mainly because of investments in recent acquisitions.

AOL bought The Huffington Post last year for $315 million and the technology blog TechCrunch in 2010.

For all of 2011, AOL earned $13.1 million, or 12 cents per share. That's compared with a loss of $782.5 million, or $7.34 per share, in 2010. Revenue fell 9 percent to $2.2 billion from $2.42 billion.