A woman walks out of AOL offices in New York, November 19, 2009.

Credit: Reuters/Shannon Stapleton

NEW YORK (Reuters) - AOL Inc reported a surprise second-quarter loss on Tuesday, citing weaker-than-expected advertising growth that sent shares of the company plummeting as much as 20 percent on Tuesday.

The company, which Time Warner spun off after a disastrous decade-long merger, is trying to regain its former status as one of the world's most popular online destinations by investing heavily in efforts such as hyperlocal news network Patch and by blockbuster purchases like the Huffington Post.

Advertising revenue rose 5 percent to $319 million. Sales of display ads -- big splashy units that appear on Web pages -- gained 14 percent, but Evercore Partners analyst Ken Sena was expecting a 25 percent increase.

While AOL has finally made progress turning its advertising revenue around after several quarters of declines, Chief Executive Officer Tim Armstrong said display growth should have been stronger.

"We had the ability to capture more than we did," Armstrong said during a call with analysts.

Integration of the Huffington Post into AOL's properties had to do partly with the slowdown in June display ad sales with July trending the same, said Arthur Minson, chief financial officer of AOL.

Investors punished AOL shares, causing a halt in trading twice during the morning because of volatility.

AOL recently reorganized its sales force at the end of July as a part of an effort to boost lagging advertising demand. At that time, its head of advertising -- former Google executive Jeff Levick -- left the company.

"From an investor standpoint, didn't we go through this last year?" Sena said. "To be honest, you have so many buying opportunities out there where the stocks have strong fundamental stories."

Still Armstrong insisted on the call that the shake-up was not another reorganization -- one of several that AOL has been through over the past couple of years -- and that the sales force remained intact.

"It's about us improving the operations of our advertising business globally," he said.

The company is still waiting for sales at Patch -- an ambitious project consisting of 800 local community Websites-- to kick in.

Armstrong said AOL could do a better job growing revenue at Patch and monetizing traffic and revenue at some of the Huffington Post media properties.

AOL is up against Google as well as newer rivals like Facebook and Twitter. Its share of online U.S. ad revenue is expected to decline 2.7 percent this year, down from 3.4 percent in 2010, according to research firm eMarketer.

Revenue fell 8 percent to $542.2 million, on a 23 percent drop in subscription revenue. Analysts were expecting revenue of $530.4 million.

The company said its second-quarter loss had narrowed to $11.8 million, or 11 cents per share, from $1.06 billion, or $9.89 per share, a year earlier, when it took a goodwill impairment charge of $1.41 billion.

Analysts on average were looking for a profit of 4 cents per share, according to Thomson Reuters I/B/E/S.

(Additional reporting by Saqib Iqbal Ahmed and Sayantani Ghosh in Bangalore; Editing by Saumyadeb Chakrabarty, Lisa Von Ahn and Gunna Dickson)

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WikiLeaks supporters wear masks of the ''Anonymous'' internet activist group and a mask of WikiLeaks founder Julian Assange (R) during a demonstration calling for the release of Assange, in Malaga, southern Spain December 11, 2010.

Credit: Reuters/Jon Nazca

WASHINGTON (Reuters) - Hackers with the loose-knit group Anonymous said on Friday they had broken into the network of U.S. government contractor Mantech International Corp and posted some NATO-related correspondence online.

Anonymous, tweeting as AnonymousIRC, offered the correspondence between Mantech and the North Atlantic Treaty Organization as proof of the breach. Two involve NATO contracting offices, and one discusses deploying staffers to an unnamed "NATO Theater of Operations" for what appears to be tech services.

Mantech, which claims the U.S. Defense, State and Justice Departments among its clients, declined to comment. It offers cyber security among its services.

Hackers associated with Lulz Security and Anonymous have claimed responsibility for cyber attacks on the U.S. Central Intelligence Agency, the U.S. Senate, Sony Corp websites and the website of Murdoch's British newspaper group, News International, among others.

Authorities made some arrests in connection with the breaches, including a teenager detained at a house in the remote Shetland Islands, off Scotland's northeast coast.

There have also been other arrests in Britain and in the United States.

The group has urged supporters to boycott eBay Inc's PayPal electronic payment service, or to close existing accounts. It has previously attacked PayPal to show opposition to the service's refusal to process payments to WikiLeaks, the website founded by Julian Assange that published copies of secret U.S. government diplomatic cables.

(Reporting by Diane Bartz; Editing by Gary Hill)

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SEOUL (Reuters) - Apple Inc's Korean unit has paid compensation to a user of its popular iPhone after collecting location data without consent, lawyers and court officials said, the first payout by the company over these complaints.

Apple Korea agreed to pay 1 million won ($946) in compensation to Kim Hyung-suk, a lawyer, following a court order in May, two officials at Changwon District Court told Reuters on Thursday. They declined to be identified because they are not authorized to speak to the media.

Kim's law firm, Mirae Law, said Apple made payment last month. Apple could not be immediately reached for comment in Seoul.

Mirae Law said it was now preparing a class action lawsuit against Apple for the unauthorized data collection. A website for class action sign-up has been set up but was paralyzed due to heavy traffic. (www.sueapple.co.kr)

Apple released a software update in May to fix a problem that enabled its mobile devices to collect and store customers' location data. The revelation that Apple's iPhone collected data and stored it for up to a year has prompted renewed scrutiny of the nexus between location and privacy.

U.S. lawmakers have accused the technology industry of exploiting location data for marketing purposes - a potentially multibillion-dollar industry -- without getting proper consent from phone users.

Google Inc's Seoul office was raided in May on suspicion its mobile advertising unit AdMob had illegally collected location data without consent, in the latest setback to the Internet search firm's Korean operations.

Executives of both Apple and Google have said they did not abuse the information.

Any class action may further pressure Apple in the home market of its key rival Samsung Electronics.

Samsung's flagship Galaxy S smartphone has emerged as a major competitor to the iPhone.

The iPhone is sold by top mobile carrier SK Telecom and second-ranked KT Corp in South Korea. KT, the major seller of the iPhone, said its iPhone subscribers reach more than 2.7 million, while SK Telecom declined to provide any details.

Apple sold a record 18.65 million units of its blockbuster iPhone globally in the March quarter.

($1 = 1056.800 Korean Won)

(Reporting by Ju-min Park and Hyunjoo Jin; Editing by Anshuman Daga and Lincoln Feast)

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BANGALORE (Reuters) - Sprint Nextel (S.N) has received subpoenas from nine states in connection with antitrust reviews of AT&T's (T.N) proposed $39 billion purchase of T-Mobile USA, according to a Sprint letter posted on the Federal Communications Commission (FCC) website.

In its letter dated June 28 to FCC, Sprint said it had received subpoenas and civil investigation demands from attorneys general in the states of Arizona, Florida, Hawaii, Illinois, Minnesota, New York, Pennsylvania, Texas and Washington, as well as from the Antitrust Division of the U.S. Department of Justice.

Sprint, the No.3 U.S. mobile service, is opposing AT&T's proposed $39 billion purchase of No.4 U.S. mobile service T-Mobile USA, a Deutsche Telekom AG (DTEGn.DE) unit, on the grounds it will give too much competitive power to one company.

Sprint said in its letter that the states have asked the company to provide all the materials it had submitted to FCC regarding AT&T's deal.

Meanwhile, an AT&T spokesman told Bloomberg that his company had also received subpoenas from the same nine states regarding its proposed T-Mobile transaction.

In June, AT&T said it is confident of winning regulatory approval for its T-Mobile deal in the first quarter of 2012. The company had then said it supplied the Justice Department with a requested second round of data, and had reviewed the comments of those who oppose the deal.

AT&T was not immediately available for comment.

(Reporting by Sakthi Prasad; Editing by Jon Loades-Carter)

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Baidu's website is seen on a laptop screen in this photo illustration taken in Shanghai December 15, 2010.

Credit: Reuters/Carlos Barria

SHANGHAI (Reuters) - Baidu, which has three-quarters of China's search market, signed a deal with Microsoft's Bing to offer English-language search to Baidu users, as it eyes an overseas expansion and Microsoft aims to increase its presence in the world's largest Internet market.

Baidu dominates China's search-engine market after Google Inc pulled out last year following a high-profile fallout with Beijing over censorship.

The partnership will allow English-language input into Baidu's search box to automatically activate Bing, whose search results will be delivered to Baidu's web pages, Baidu said in an emailed statement on Monday.

Analysts said the tie-up would help Bing to gain greater access to China's more than 450 million Internet users and further dent Google's business in the country.

"The cooperation between Baidu and Microsoft will further strengthen Baidu's dominance in China's search-engine market, and will also make Google's business in China more difficult," said Dong Xu, an analyst with Analysys International.

Baidu had 76 percent of the Chinese search market in the first quarter of 2011, according to Analysys International data.

Bing, which censors its contents in China to be able to operate in the country, has a negligible share of the market, while Google has nearly 20 percent counting visits to its offshore sites.

The new tie-up, due to be launched this year, builds on existing cooperation between Baidu and Bing on mobile platforms and page results, said Baidu spokesman Kaiser Kuo.

Kuo said Bing was not submitting to any further censorship or restrictions on its English search as a result of the deal "than they already do."

Microsoft was not available for comment.

With web penetration hovering around 30 percent and lack of sophisticated users outside the big cities in China, the potential for growth in the sector is huge, analysts say.

Some analysts were however skeptical of just how much demand there would be for English search on Baidu.

"It's a good thing, but I see very minimal impact for Baidu. I don't see a lot English keywords going through Baidu. It goes through Google," said Wallace Cheung, a Hong Kong-based analyst at Credit Suisse.

It is not Baidu's first time to enter the search market overseas. It has a Japanese search service that is loss-making.

Baidu has also been diversifying from its core search business to compete in the fast-growing segments of mobile and social networking.

Baidu has hinted it is developing a mobile device operating system and recently invested $306 million to take a majority stake in travel website Qunar, as it focuses more on e-commerce. The company also has a stake in online video firm Qiyi.com.

Shares in Baidu have risen more than 48 percent so far this year, even after falling in June, as concerns over fraud at some Chinese companies listed overseas hit market sentiment toward Chinese companies listed in New York more broadly.

(Additional reporting by Samuel Shen; Editing by Matt Driskill and Anshuman Daga)

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