AOL Time Warner Inc yesterday said the performance of its America Online Inc online unit will not be as good as expected, due to "the continued softness" in online advertising. But the company said that, as a whole, it will hit estimates.

"America Online's full-year advertising and commerce revenues are tracking to $1.7bn, with an additional 5% downside risk," the company said.

This compares to previous estimates of advertising and commerce revenue of between $1.8bn and $2.2bn. Earnings before interest, tax, depreciation and amortization for the ISP unit as a whole is expected to be $1.7bn to $1.8bn.

However, AOL Time Warner expects its other businesses will offset the advertising problems. The firm expects to perform within expectations, albeit at the low end of its previous range of EBITDA growth of 5% to 9% and revenue growth of 5% to 8%.

In the current third quarter, AOL expects to see revenue growth in the mid-single digits and EBITDA growth to be in the low-single digits, when compared to the equivalent quarter 2001, the company said.

The ISP unit is currently being shaken down from within by new chief Jonathan Miller, according to reports. The business is now widely seen as the runt of the media giant's litter of units, largely due to the online advertising slump and slowing subscriber growth.

AOL and the US Securities and Exchange Commission are both currently probing certain accounting concerns to the tune of at least $49m, primarily related to how the company started booking revenue when online advertising hit the skids late 2000.

© ComputerWire