Wall Street's attention this week will be focused on the flood of corporate earnings reports. Among them will be America Online Inc., the No. 1 Internet service, which has proposed to buy Time Warner Inc. AOL is expected to post higher fiscal second-quarter earnings Wednesday, helped by holiday advertising and subscriber growth. The company is forecast to earn 8 cents a share on revenue of $1.57 billion in the quarter ended Dec. 31, up from 4 cents on $1.14 billion in revenue in the year-ago period, according to First Call/Thomson Financial. First Call's year-ago figures reflect a stock split and Netscape Communications Corp. results, which was acquired by AOL. Some Web sites that track profit estimates say America Online could earn as much as 10 to 11 cents a share.
Many investors and analysts will be more interested in details of AOL's pending acquisition of Time Warner, the world's largest entertainment company, than in the quarter's results. AOL shares have dropped about 11% since the deal was announced last Monday, due in part to fears that the company's growth rate will slow after the purchase. Analysts and investors will look for more details in a conference call Wednesday.
Meanwhile, look for software giant Microsoft Corp. on Tuesday to post strong earnings, despite its dramatic reshuffling at the top and signs that the "post-PC era" has it in a quandary. The reason for the good news: The Wintel world is still alive and kicking up strong earnings, fueled by the growth of the Internet that eventually is supposed to make Microsoft's packaged software obsolete. Not yet though. Results next week will show strong double-digit earnings growth, with most analysts expecting a 16% to 17% gain. The consensus earnings per share forecast is 42 cents a share, up from 36 cents a year ago.