Editor’s note: This piece originally ran on PandoDaily.com. It is being reprinted with permission.
Good news! For the first time in seven years, AOL’s revenue didn’t shrink! The company said Tuesday morning that it brought in $532 million in revenue last quarter, flat with the same quarter one year ago. Which is to say AOL still hasn’t seen any growth since 2005. Okay… maybe it’s not such great news after all.
But AOL investors are happy. They pushed the stock up as much as 16 percent Tuesday, after AOL reported its earnings and promised a $5.15 a share dividend this December, financed by the $1.1 billion deal to sell and license its patents to Microsoft. AOL also posted a net profit of 22 cents a share, versus a 2-cent loss a year ago. That profit was well above the 17 cents a share analysts were expecting.
After three and a half years as CEO, Tim Armstrong is starting to see some success in turning AOL around. This is a notable accomplishment for two reasons. First, turnarounds in the Web industry are as rare as they are difficult. More often, they result in a company merely treading water and not really reviving. Second, AOL’s turnaround was especially tricky because, for many years, its profits came from the aging dial-up subscription business that was a big business a dozen years ago.
Armstrong is making a lot of shrewd moves this year. He arranged the patent deal with Microsoft, giving AOL enough cash to buy back shares and offer a dividend. That won him the support of shareholders right in time to defeat a challenge by activist hedge fund Starboard Value. Armstrong has also succeeded in cutting some costs at AOL to shore up its profits.