AOL Posts Higher Revenue and Buys Company

In line with its ambitions to become a platform for live broadcasting and programming, the company also said that it had acquired Adap.tv, a video advertising company that allows purchases across the Internet and on television. The cost was $405 million.

Under the terms of the deal, AOL will pay $322 million in cash and about $83 million in stock. That is more than the $315 million it paid for The Huffington Post two and a half years ago and thus is its biggest acquisition since becoming an independent company.

Video, with its ability to command higher advertising rates, has been one of the biggest points of focus for Internet media companies for some time. AOL has been seeking to amass sources of video content as part of its bet that consumers will increasingly watch video online instead of on television.

“AOL is a leader in online video, and the combination of AOL and Adap.tv will create the leading video platform in the industry,” Tim Armstrong, AOL’s chairman and chief executive, said in a statement. “The Adap.tv founders and team are on a mission to make advertising as easy as e-commerce, and the two companies together will aggressively pursue that vision.”

AOL executives added in a phone interview that the acquisition was not as much about promoting their own content as it was about diversifying the company’s earnings into a revenue stream — the infrastructure for ad purchasing for online video — that it thinks has tremendous potential.

In addition to the Adap.tv sale, AOL trumpeted the fact that its ad sales were up 5 percent. However, that growth was tepid compared to overall digital ad spending in the United States. That spending grew by 14.8 percent, to $10.01 billion, in the second quarter of 2013 compared with the same period last year, according to Emarketer, an online advertising research firm.

Despite positive growth in advertising and traffic, up 3 percent year over year, the earnings revealed the company’s continued dependence on revenue from subscriptions to the AOL portal, a declining business. Looking at adjusted operating income before depreciation and amortization, or income earned from regular operations, the membership business was a net positive at $151.6 million, but still down 4 percent year over year.

Wall Street’s reaction was mixed, and AOL’s stock rose 1.4 percent, to $36.69 at the close of trading. Analysts were pleased that AOL seemed to be cutting losses. The brand groups, for example, cut losses from $15.2 million for the quarter a year earlier to $1.4 million this last quarter. Though losses increased in this area for AOL networks, Mr. Armstrong said that was because the company was in “investment mode.”

But many worried about whether AOL paid too much for the Adap.tv purchase, which will be completed in September.

Adap.tv, founded in 2007, counts Spark Capital, Redpoint Ventures and Gemini Israel Funds among its investors.

This article has been revised to reflect the following correction:

Correction: August 7, 2013

An earlier version of this article misstated the quarterly revenue for AOL. It was $541 million, not $361 million, for an increase of 2 percent, not 7 percent. The error was repeated in an earlier version of the headline.

Higher Expenses at eBay Push Net Income Down

Though he called the quarter’s results strong, eBay’s chief executive, John Donahoe, said economic weakness in Europe and Korea would “continue to be a challenge” in the second half of the year.

EBay said it earned $640 million, or 49 cents a share, in the April-June period, compared with $692 million, or 53 cents a share, a year earlier.

Adjusted to exclude one-time items, earnings rose to 63 cents a share, from 56 cents, and matched Wall Street’s expectations.

Revenue rose to $3.88 billion from $3.4 billion. Analysts polled by FactSet expected $3.89 billion.

Mr. Donahoe said eBay’s core businesses — PayPal and its e-commerce sites — were going strong. PayPal added 4.7 million active registered accounts, ending the quarter with 132 million users.

EBay’s operating expenses were $1.92 billion, up 12 percent from a year earlier.

For the current quarter, eBay is forecasting earnings of 49 cents to 51 cents a share and adjusted earnings of 61 cents to 63 cents a share. Analysts estimated higher adjusted earnings of 65 cents a share. EBay expects revenue of $3.85 billion to $3.95 billion, short of analysts’ expectations of $3.97 billion.

EBay still expects adjusted earnings of $2.70 to $2.75 a share and revenue of $16 billion to $16.5 billion for the full year. Analysts forecast adjusted earnings of $2.75 a share on revenue of $16.31 billion.

The midpoint of eBay’s earnings outlook for the year is below analysts’ average estimate.

H.P. Earnings Are Higher Than Expected

H.P. reported that net income fell 31 percent to $1 billion, or 55 cents a share, from the year-ago quarter. Revenue fell 10 percent, to $27.6 billion, H.P. said.

“We beat the upper end” of company projections for the quarter, Meg Whitman, H.P.'s chief executive, said in a statement accompanying the earnings. “I feel good about the rest of the year.”

The net income was above the expectations of Wall Street analysts, who mark their revenue and earnings projections based on nonstandard accounting. By those measures, H.P. had net income of 87 cents a share.

Analysts had projected H.P. would make 81 cents a share, on revenue of $28.12 billion, according to a survey of analysts by Thomson Reuters.

H.P., the world’s largest maker of personal computers and printers, has struggled for years with a declining market for PCs, less printer demand and turmoil in its executive ranks.

Ms. Whitman, who took over in September 2011, has said that fixing the company will be a five-year process and has described 2013 as a year of rebuilding before growth accelerates in 2014.

DealBook: The Hurdles to a Higher Offer for Dell

Chip East/ReutersThe activist investor Carl Icahn.

More than a month has passed since Dell announced its planned $24.4 billion sale to its founder, Michael S. Dell. Since then, a number of shareholders have loudly complained that the price Mr. Dell has offered for the computer company is far too low.

With the stock trading well above the $13.65 a share that Mr. Dell has offered — $14.31 at Friday’s close — the billionaire may very well have to raise his offer.

But that’s going to cost real money.

Here’s one way of looking at it: Raising the bid by a dollar a share would cost about $1.8 billion, so getting to the $15-a-share bid that some analysts see as necessary would add about $2.3 billion to the deal’s price.

It’s unclear who might bear the cost of providing the additional capital. Mr. Dell is rolling over the roughly 16 percent of shares that he controls, as well as providing around $750 million in money. His partner, Silver Lake, is paying about $1.4 billion.

Silver Lake is balking at adding more money to the deal, according to people briefed on thinking at the private equity firm. Silver Lake’s contribution is the largest it has committed to a deal, and so far it has said that it will not pay more. (Of course, that could well be a negotiating strategy.)

Justin Sullivan/Getty ImagesMichael S. Dell, the founder of the computer company that bears his name.

Executives at Silver Lake also believe that Dell is trading at about 8.7 times its projected earnings before interest, depreciation, taxes and amortization, a rich multiple that it hasn’t reached in years. This is at a time when analysts are estimating that the company’s earnings will decline nearly 10 percent year after year.

The investment firm, negotiating on behalf of itself and Mr. Dell, initially bid about $11.22 a share last year, these people said, before a series of negotiations with a special committee of Dell’s board ended at $13.65.

One clear impetus to lead to a higher bid would be if a competing bid emerged. The special committee has been overseeing a “go-shop” process aimed at flushing out better offers, and has attracted the likes of Hewlett-Packard, Lenovo and the Blackstone Group.

But it’s unclear whether anything definitive will come from the go-shop process. H.P. and Lenovo are widely seen as taking a free look at their rival’s books, and several people briefed on the process believe Blackstone is unlikely to bid either.

Carl C. Icahn, who privately demanded that Dell’s board issue a special dividend instead of following through on the deal, is also participating in the go-shop process. Yet, while he has looked at the company’s electronic data files, according to a person briefed on the matter, it’s also unclear whether he’ll make an offer that directors will deem acceptable.

Jeff Zelevansky/ReutersCarl Icahn has suggested a so-called leveraged recapitalization of Dell.

One of the issues facing Mr. Icahn and any other potential bidder is that paying for an alternative deal is getting trickier. A bevy of banks are already arranging debt for Mr. Dell and Silver Lake: Bank of America Merrill Lynch, Barclays, Credit Suisse and the Royal Bank of Canada.

Last week, the buyout group added Citigroup as an adviser, according to people briefed on the matter, nominally preventing the firm from joining a competing bid.

Both Dell and its suitors have been waiting until Friday to begin mounting a defense of the $13.65-a-share offer. The company is expected to disclose the proxy filing for the transaction as soon as next Monday, people briefed on the matter said, and the lengthy report is expected to touch on how the current bid was reached.

As CNBC reported on Friday, the filing is expected to detail several instances of Dell’s devising internal earnings projections over the last year, only to miss them. A forecast of $5.6 billion in operating income for the current fiscal year, issued last July, may come in well below $3.7 billion, according to people briefed on the impending filing.

None of which is to say that Mr. Dell and Silver Lake won’t eventually blink and agree to raise their offer. But with a shareholder vote on the deal not likely to take place until late June at the earliest, they have plenty of time to press their case for the existing deal.

In Europe, a Push for Higher Phone Fees

BERLIN — When the authorities have tinkered with European telecommunications rules, it has usually been to lower prices for consumers, whether through retail price controls on mobile roaming fees or mandatory cuts in regulated interconnection charges.

But this year, to encourage more investment in high-speed broadband networks, regulators are considering helping the biggest operators increase a main source of income: the rent they receive from rivals that lease their landline grids.

The architect of the plan, Neelie Kroes, the European Union’s digital agenda commissioner, has pitched the increases as part of a broader package to stimulate spending while preserving competition and consumer choice.

The plan, however, has alarmed operators that would have to pay the higher charges, like the British mobile operator Vodafone. Vittorio Colao, chief executive of Vodafone, said that the plan to increase the fees collected by former monopolies, including BT, Deutsche Telekom, France Télécom, KPN, Telecom Italia and Telefónica, could lead to a “re-monopolization” of the business.

Mr. Colao said he was worried that landline operators would use the additional revenue to lower their own prices and try to squeeze competitors like Vodafone.

“Increasing the incentive to invest is a good thing,” Mr. Colao said. But now Ms. Kroes must “demonstrate that these new criteria won’t contaminate the competitive arena in Europe,” he said.

Under the plan, the European Commission, the executive arm of the European Union, would begin regulating the fees that mobile operators routinely pay to lease the grids of landline operators.

In much of the world, running telecommunications lines to homes and businesses has traditionally been the domain of a local monopoly, or sometimes a duopoly in the case of telephones and cable television in the United States. Until 1998, countries in the European Union were allowed to maintain national monopolies for this “local loop” to the consumer.

With deregulation, however, the former monopolies were required to unbundle the cost of the local loop and offer it to competitors, thus allowing companies like Vodafone to enter the market.

Despite 14 years of deregulation, and the addition of more than 100 mobile operators in Europe, the former monopolies still supply the majority of fixed-line services in their home countries. In Spain, Telefónica has more than 70 percent of this business.

Until now, these unbundling rates have been set by national regulators, and the average monthly cost per customer in the European Union stands at €8.62, or $11.35. The fee typically makes up a third or more of monthly landline phone bills in Europe and also influences wireless prices because it affects mobile operator costs. The fee ranges from €4.20 in Slovakia to €12.41 in Ireland.

Mrs. Kroes proposed to lower, not raise, unbundling fees in September 2011, to make the old landline networks less profitable for big operators and to encourage them to invest in new networks. But the former monopolies protested, and after personal appeals from executives at big operators, in some cases accompanied by their investors, she reversed course.

Ms. Kroes is proposing that each country within the European Union be required to set its fee within the range of €8 to €10 per month, according to a copy of her proposal obtained by the International Herald Tribune. The new range would most likely require 10 E.U. countries where the fee is currently below this range to raise it, in some cases only slightly, and in others, sharply.

The increases would in all likelihood be passed on to consumers. The rise in fees could be greatest in Eastern Europe, where regulators have been most aggressive in setting low leasing rates to encourage competition. The level of leasing charges could double in Estonia, Latvia, Poland and Slovakia.

Mr. Colao, the Vodafone chief executive, said Ms. Kroes needed to tighten the legal safeguards in her plan to prevent big operators from exploiting access to landline networks.

Amazon Reports Loss Despite Higher Sales

If Amazon were an ordinary company, investors would long ago have strapped its management to a rocket ship and sent it far, far away.

Amazon said Thursday that it lost money in the third quarter, continuing a trend of unimpressive earnings reports for the retailer. Similar disappointments are causing carnage at some of Amazon’s land-based electronics competitors. But Amazon’s many fans seemed largely unfazed.

The earnings report, released after the market closed, sent Amazon shares down as much as 9 percent in after-hours trading, but they quickly recovered. The stock hit a record high earlier this year, and it trades at an astronomical price/earnings multiple.

What separates Amazon from the competition is that it is not trying to make money. It is instead trying to grow as fast as it can, something it has been doing successfully for 15 years. What was once a cute start-up is now one of the country’s biggest retailers.

Third-quarter revenue was $13.8 billion, a little less than the $13.9 billion that analysts expected but up 27 percent from 2011.

Despite all those customers snapping up Kindles and “50 Shades of Grey,” the company had warned that a loss was coming. Amazon said it lost 60 cents a share in the third quarter, but more than half of that was from its investment in the daily deals site Living Social. The consensus estimate was a loss of 8 cents. Amazon earned 14 cents a share in the third quarter of 2011.

In a conference call with analysts, Tom Szkutak, Amazon’s chief financial officer, declined as usual to shed much light on the company’s plans. With regard to the persistent rumor that Amazon will open some pop-up stores during the holidays to sell Kindle devices, for instance, he said that the company’s current practice of selling through other retailers is “not really a driver of our business.”

Amazon’s strategy of selling as cheaply as it can may be tough on its margins but it is tougher on competitors. Radio Shack missed its earnings forecasts this week, prompting doubts about its viability. The specialty home appliance and electronics retailer H. H. Gregg, which operates 200 stores in the Midwest and Southeast, saw its shares drop 13 percent Thursday. Shares of Best Buy fell 10 percent as the store warned that third-quarter profit would be “significantly lower.”

“Amazon is having a major impact on a number of businesses,” said Jason Moser, who covers Amazon for the Motley Fool investment site and owns shares in the retailer. “We know that chief executive Jeff Bezos is quite patient and has plenty of financial resources. It appears his strategy is working. The third-quarter loss was modest and the long-term implications here are as strong as ever. My faith isn’t dented in the least.”

There are Amazon skeptics. Colin Gillis of BGC Partners published a haiku before the earnings report: “So much revenue, and with all those shipping costs, so little profit.” What his verse lacked in poetry it made up in cogent criticism.

Amazon’s operating margins have been about 2 percent or less for the last year. “Amazon has the lowest operating margin and the highest valuation in our technology company coverage,” Mr. Gillis wrote, adding that “the company is not likely to achieve material leverage off its revenue growth as costs associated with investments into its digital platforms build.”

Furthermore, “the nature of Amazon’s core business is that of a discount retailer, which limits margin upside.” In the second quarter, the analyst noted, Amazon increased revenues by $2.9 billion but income from operations declined by $95 million to $107 million.

The third quarter is mere preamble to the fourth quarter, where Wall Street expects significant revenue growth powered by new Kindle tablets and associated downloads. New warehouses are coming, bringing physical goods to customers so quickly that they will, in theory and no doubt in practice, order more.

Asked about same-day delivery, Mr. Szkutak said on the conference call that the warehouses have “helped improve our delivery speed to customers.” He added, “What I would expect moving forward would be more of the same.”

AT&T Posts Higher Profit and Holds On to Its Subscribers

That was the lesson of AT&T’s latest earnings report on Tuesday. The company posted a healthy profit in the second quarter and said it was “encouraging” that most of its customers had remained loyal despite the rising costs of its wireless data plans and other policy revisions.

The company reported that its net income rose 8.7 percent to $3.9 billion, or 66 cents a share, in the second quarter from the year-ago quarter. It emphasized that its churn, the rate at which subscribers leave the carrier, was at a record low of 0.97 percent.

All this despite the fact that AT&T has, in the past year, made a number of controversial changes to its policies, like raising the costs of its data plans, doubling its upgrade fee for new phones and throttling the speeds for customers with unlimited data plans. Along with other carriers, like Verizon, it has made these types of moves as the business starts to focus on how much people use mobile data to work and play, not how much they talk on the phone.

John J. Stephens, AT&T’s chief financial officer, said that 27 million smartphone customers, two-thirds of the total, were subscribers to the company’s tiered data plans, and that of those, 70 percent had chosen the more expensive plans.

In response to an analyst’s questions about mobile revenue, he said the company felt comfortable because even though it raised its data plan prices for new subscribers in January, customers were not leaving.

“The fact that’s been taken into account with low churn is just another encouraging piece,” he said.

Mr. Stephens added that the company had dealt with customers who still had older, unlimited data plans by imposing its new throttling policy, in which it slows data speeds after a customer hits a certain limit of use.

“Those extraordinary consumers have been addressed, and that process has been in place for more than a few months now,” he said. “Quite frankly, once again, I look to churn as an indicator of how that’s being accepted and how that’s impacting our customer base, and we feel good about the progress we made there.”

AT&T, based in Dallas, said revenue climbed to $31.6 billion in the quarter, about even with last year but a 2 percent increase when adjusted for the sale of an advertising unit, which includes the yellow pages business.

Analysts had expected 63 cents a share on revenue of $31.7 billion, according to a survey by FactSet. Shares of AT&T were down 75 cents, or 2.12 percent, at closing Tuesday.

The company also said that strong mobile device sales, new customers and revenue from subscribers drove growth in the quarter. It sold 5.1 million smartphones and added 320,000 contract subscribers, the most valuable type of customer. Its average monthly revenue per subscriber increased 1.7 percent, to $64.93.

The iPhone continues to be an important product for AT&T. The company activated 3.7 million of them in the quarter, more than the 2.7 million iPhones sold by Verizon in the same period. AT&T said 22 percent of customers buying iPhones were new to the company, meaning it is managing to lure some subscribers away from other carriers.

Following a move by Verizon, AT&T recently introduced shared data plans, which allow subscribers to share a set amount of wireless data across multiple devices, like smartphones and tablets. Unlike Verizon, AT&T will offer these shared data plans as a new option on top of its current tiered plans. Verizon discontinued its tiered data plans for new subscribers in favor of the shared plans.

Chetan Sharma, an independent mobile analyst, said he found AT&T’s low churn rate the most remarkable part of its earnings report.

“That means they’ve got a grip on their subscriber base,” he said in an interview.