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The company also announced that the billionaire media mogul Ted Turner was stepping down from his position of vice-chairman, to focus on his philanthropic pursuits. Turner founded CNN, the cable news network that was later acquired by Time Warner.

Across the whole company, earnings before interest, tax, depreciation and amortisation were up by 5% to $9.1bn. Full-year revenue for the year climbed by 7% to $41.1bn.

The performance of America Online was hit by a decline in advertising, commerce and content revenues. Earnings for the year were down by 22% to $1.8bn from $2.3bn in 2001. The company is now cutting costs and drawing up plans to revitalise the internet company. The $45.5bn charge was much larger than analysts had predicted at the beginning of the month, when the figure was thought to be around $10bn.

However, advertising was better at the company's publishing division, where gains were made in advertising. Advertising and commerce revenues were up by 8%, although is was partly due to acquisitions as well as what AOL Time Warner described as "modest growth in advertising".

Advertising review

The results come as AOL Time Warner instigates a review of America Online's $100m advertising account. It is understood that incumbent Gotham was fired earlier this month.

Six agencies are thought to have been invited to compete for the account Interpublic Group of Companies-owned Hill, Holliday, Connors, Cosmopulos; Omnicom Group network BBDO Worldwide and DDB Worldwide; Publicis Groupe agency Saatchi & Saatchi; Wieden & Kennedy; and Crispin Porter & Bogusky, which is part of the Canadian group Maxxcom.

Looking ahead

Looking forward to 2003, AOL Time Warner's chief financial officer, Wayne Pace, said that forecasts assume a continuing modest advertising recovery, with earnings to remain flat. With 2002 a record year for AOL Time Warner's film division, which was behind blockbusters such as 'The Lord of the Rings: The Two Towers', and 'Harry Potter and the Chamber of Secrets', Pace said it was unlikely that this division would achieve growth.

Dick Parsons, chief executive officer of AOL Time Warner, said: "In 2003, our company will strive to run each of our businesses as well or better than before, with a continued major focus on stabilising and revitalising America Online."

When America Online merged with Time Warner in 2000, it was sold to shareholders as a groundbreaking deal between an old-media firm and a new-media firm.

However, a clash of cultures soon emerged, only worsened by the collapse in value of the company's shares following the dotcom collapse. Steve Case, founder of America Online and architect of the merger, has already been forced from his position as chairman after pressure from shareholders.

The company already made the wrong kind of history in 2002, when it announced a $54bn write-off.

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