AOL’s Armstrong looks ahead

CEO predicts higher profits in post-Time Warner era

Nearly 10 years after its disastrous merger with Time Warner, AOL is going it alone as of today in a markedly different media landscape.

On the day AOL completed its long-awaited spinoff from Time Warner, AOL chief exec Tim Armstrong painted a rosy picture of the company’s future at a Wall Street confab. Stockholders of the media giant received 11 shares of a newly independent AOL for each one of Time Warner as the two companies officially ended a historically unhappy marriage.

Armstrong said he envisions the streamlined Netco enjoying higher profits, better margins and the ability to churn out lots of cash. He’s on the hunt for engineers to build the company and thinks there are still enough devoted fans to make it a go after years of turmoil, constant reinvention and endless rounds of layoffs.

There are two AOL brands, Armstrong told investors at the UBS Annual Global Media and Communications Conference.

One is “AOL the financial brand, ‘possibly the worst merger in history,’ which is what everyone talks about.” The other, he said, is “the consumer brand. People like AOL and want it to be successful.”

He outlined three areas of focus: advertising, content and communication — such as instant messaging and email. The communication aspects of AOL, he said, had become cluttered with ads and are undergoing a major cleanup he called “product hygiene.”

He’s also tasking top engineers to refurbish valuable content sites like Mapquest — and he’s on a talent search.

“Engineers love to solve big problems, and AOL is a big problem. I think we are getting traction with external engineers. We are doing very heavy engineering recruiting right now, so if anyone has relatives who are engineers, please send them our way and we will make them very happy,” he said.

He said the company would continue to lose subscribers from its dial-up business, which has declined steadily since 2002. Although it’s had some successes, AOL hadn’t been able to make up for dial-up with advertising or content businesses. It never benefited from any particular synergies with Time Warner, or visa versa.

Queried about executive compensation, Armstrong said his includes stock incentives, a base salary of $1 million and a bonus of up to $4 million. He said he didn’t take a bonus this year “since I didn’t think I should get one after laying off a third of the employees.”

Asked what benchmarks investors should look for to evaluate the company’s progress, he said: “I would hope that we would have life signs in domestic display, (a) reversal in down traffic, and that we’re showing you signs of a well-run business that’s heading towards profitability. No more Hail Marys at AOL.”

Armstrong, a former Google advertising exec, was set to ring the opening bell at the New York Stock Exchange this morning to mark the start of trading in shares of the new AOL.

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