Cuts push dot-coms toward profits

Last week, Walt Disney Chairman Michael Eisner offered a prediction that seemed unthinkable a year ago: The company's beleaguered Internet operations will be in the black by September. Disney isn't alone. New York Times Digital in 2001 reported positive net income in the third quarter and two consecutive fiscal quarters of positive earnings before income, taxes, depreciation and amortization (EBIDTA) — a key measure of financial health in the media business. A small crop of lesser-known sites, including online entertainment network eUniverse and sweepstakes site iWon, also say they have earned, or are close to earning, elusive Web profits.

Don't call it a comeback. The online media sector is still at a low point, primarily because advertising is in the pits and shows few signs of recovering anytime soon. But brutal layoffs and a sharp dose of fiscal discipline over the past 18 months are now offering a surprising number of Web publishers the hope of profitability at one of the worst times on record for the sector.

"The staff levels, the marketing, the scope of the business markets they're trying to bite off have been right-sized," said Lanny Baker, an analyst at Salomon Smith Barney. "There was a day when New York Times Digital and Disney had wireless strategies, portal strategies, content strategies and (so on). Now they're focusing on what it is they do well and building a cost structure that works."

To be sure, the list of online troubles remains depressingly long for Net media executives and investors. Advertisement

Internet giant AOL Time Warner on Monday lowered guidance on its revenue and earnings expectations. Web portal Yahoo is struggling to recover from a year in which its revenue plummeted by well over a third. Although Microsoft does not break out financial results for its MSN Network, the division's history of steep losses has become the stuff of legend. (MSNBC is a Microsoft - NBC joint venture.)

Far from signaling a rebound in the sector, signs of a pending trickle of online profits show the success of a simple formula: cut first, and ask questions later.

News source: MSNBC - Cuts push dot-coms toward profits

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