AOL Time Warner under SEC review
By Alec Klein
AOL Time Warner Inc. disclosed yesterday that the Securities and Exchange Commission has launched a probe into its accounting practices after questions were raised about how the company generated revenue through a series of unconventional deals.
AOL Time Warner chief executive Richard Parsons said the company is providing full details to investors and the SEC on transactions reported in the Washington Post.
That effort began yesterday as part of AOL Time Warner's announcement of second-quarter financial results.
The company performed slightly better than analysts had expected, posting a 10 percent gain in revenue, driven in large part by its content businesses, including its movie-making division, and its cable-television network.
The Dulles,Va.-based online division, however, remained a concern as its advertising and commerce revenue continued to drop and its subscription growth rate came in short of analyst expectations.
As part of its earnings announcement, chief executive Richard Parsons said AOL Time Warner contacted the SEC after the company received a series of questions from the Washington Post about AOL Time Warner's business practices.
"After the (Post) articles came out (last week), the SEC informed us that they are conducting a fact-finding inquiry," Parsons said in a conference call with Wall Street analysts and the media.
Parsons said "investor trust" is "fundamental to our future," and he promised the company "will fully cooperate" with the regulatory authorities. An SEC spokesman declined to comment.
The company disclosed the SEC inquiry after the close of markets. AOL Time Warner finished at $11.40, down 1 percent, in New York Stock Exchange trading. In after-hours trading, shares fell as low as $10.49.
AOL stock is hovering at its lowest levels since October 1998. Shares are down about 76 percent since the AOL-Time Warner merger was completed in January 2001.