AOL Time Warner disclosed yesterday that the SEC had begun an investigation into the accounting at its America Online division.
Richard Parsons: "The charges are without merit." The company has said that it did not break any laws.
Quarterly AOL revenue was down 3%, but cash flow is down 27% and ad revenue was down 40% with no sign of recovery.
Soundview: "There are two new looming issues. The investigation into AOL's accounting and the dramatic decrease in the growth of new subscribers at AOL."
Get ready for AOL to crash. Existing subscribers are leaving the network and no one is coming to replace them. Since AOLTW is maneuvering to sell off its stake in cable, there's little hope that AOL can migrate heavily into broadband service. The end is near. It's only a matter of time. The sooner that the TW content businesses can divest themselves of AOL, the better off they'll be. For now, they seem to be repeating the RBOCs' losing strategy of relying on an outdated, unprofitable line of business for essential cash flow.
AOL Accounts Under Scrutiny From the SEC