A source familiar with the plans said that AOL is considering offering some of its services free of charge to users with a high-speed Internet connection.
NEW YORK (Reuters)—Time Warner Inc. said on Tuesday it would soon disclose its business strategy for Internet unit AOL, dismissing a Wall Street Journal report that it will lose up to $1 billion through 2009 as it offers more free services.
"Recent media reports appear to be based on unauthorized disclosures, including of incomplete and largely erroneous financial information," Time Warner said. "The company cautions investors not to draw conclusions regarding AOL's future strategy until the company's presentation on August 2."
The statement followed the Journal report on Tuesday, when Time Warner shares slipped as much as 2 percent.
Citing internal forecasts at AOL, the Journal said plans to stop charging Internet users for many of its services could cost the company in the short term, but could ultimately yield higher profits as it benefits from an online advertising boom.
The strategy is part of AOL's expected shift to gain more from a Web advertising boom and move away from an eroding subscription model.
Time Warner said it will present its strategy for AOL at a separate meeting with investors to be held after its August 2 earnings announcement. Details of that meeting were to be disclosed in the near future, the company said.
A source familiar with the plans said last week that AOL is considering offering some of its services free of charge to users with a high-speed Internet connection.
The Journal report said such plans could cut in half the profit from AOL's subscription revenue in the United States from $1.6 billion this year to about $800 million in 2009.
According to the forecast, AOL subscribers would likely drop to about 6 million in the United States from about 18.6 million, the report said.
The report prompted some analysts to suggest their own projections should AOL go through with such a plan.
Bernstein Research analyst Michael Nathanson wrote in a research note that deep cuts in marketing to Internet subscribers could outweigh the loss of those subscribers in the first two years.
Nathanson said the plan could add 2 cents to Time Warner's 2006 earnings per share and 6 cents to 2007, but cut earnings per share by 3 cents in 2009.
Time Warner shares closed 11 cents lower at $16.56 on the New York Stock Exchange after trading as low as $16.25 earlier in the session.
(Additional reporting by Gina Keating in Los Angeles)
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