AOL Time Warner issues warning

AOL Time Warner issued a profit warning last night in the wake of the US terrorist attacks which it said would have a "significant" impact on its earnings.

The media conglomerate said its revenue will be hit by advertising cuts in the wake of the tragedy and its profits hit by the increased cost of news coverage of the disaster.

AOL's CEO Gerry Levin said the financial impact was, however, incomparable to the terrible suffering and loss of life inflicted by the attacks.

AOL is not alone among media companies in cutting its forecasts since 11 September. Viacom has also issued a warning to investors. AOL said now its yearly profit before tax is expected to rise by 20 per cent on the previous year, rather than the 30 per cent previously expected.

It now expects revenue to grow by between five and seven per cent.

In a statement, AOL said the terror attacks had caused an already bad advertising market to deteriorate further.

It said it plans to put "substantial additional financial resources" into funding CNN, Time magazine and AOL during the unfolding crisis.

It did not alter its outlook for 2002, and said its strategic position remained strong.

Despite this, AOL shares were still hit in after hours trading, falling back four per cent after markets closed to rest at $31.13.

Earlier in the day, AOL's stock had risen sharply, following sharp rises in most indexes yesterday as traders made up some of the ground after the disastrous falls last week.

Other technology companies have already said they will be affected by the terrorist attacks. Last week both Computer Associates and Oracle lowered forecasts.