AOL Inc. reported a small fourth-quarter profit, but sharp subscription declines and an unpredictable advertising environment undermined the future challenges for the newly independent company.

AOL registered a $1.4 million earning in the fourth quarter, reversing a significant loss the previous year.

The revenue witnessed a decline of 17%, to $809.7 million, from a year earlier. The company speculates to take a further revenue hit of nearly $225 million on account of the closure of underperforming businesses, including foreign operations in countries such as Spain and Sweden.

However, AOL executives reveal they don't expect the closures to affect profitability, and that by late this year or early next year advertising industry-wide will begin to grow.

Advertising declines look to be moderating. Ad revenue for the fourth quarter dropped 8% to $471.6 million. Those results imitated a decline of 18% in the third quarter.

AOL reveals to possess fewer than 5 million domestic subscribers at the end of 2009, down 27% from a year earlier.

In a view to bolster the content available on its collection of sites, AOL underwent a $36.5 million deal last month to acquire a Nashville-based video production firm, StudioNow.

On Wednesday, AOL quoted it expects its restructuring measure to cut ongoing operating expenses by $150 million this year.