Investors sent AOL Inc shares down sharply on Wednesday on lower than expected first-quarter revenue and as the company warned that advertising sales would remain under pressure through the rest of the year.

AOL's shares fell almost 12 percent in late morning trading.

AOL's earnings fell to $34.7 million, or 32 cents per share, from $82.7 million, or 78 cents per share, in the same quarter last year.

Excluding items, AOL earnings per share were 86 cents versus analysts' expectations of 70 cents per share, according to Thomson Reuters I/B/E/S.

Total revenue declined 23 percent to $664.3 million. Analysts had expected the company to report revenue of $679.0 million, according to Thomson Reuters I/B/E/S.

AOL Chief Executive Tim Armstrong told analysts and investors during an earnings call on Wednesday that the company will feel the impact of a sales reorganization through the rest of the year. We are not happy with the overall lag in the ad market. But we are very happy with decision the company is making for the future, Armstrong said.

Advertising revenue in the first quarter plummeted 19 percent to $354.3 million on weakness in display and search.

AOL revamped its sales team following last year's split with former parent Time Warner Inc , handing 80 percent of its sales representatives new accounts. Armstrong said on the call that AOL is retraining its sales force to better serve clients, a process that will take three to six months.

Additionally, the company said that it sold its instant- messaging service ICQ to Digital Sky Technologies Ltd for $187.5 million and that it is pursuing a sale of social networking site Bebo.

Credit Suisse analyst John Blackledge said in a research note that while AOL's overall results were better than expected, display advertising should continue to underperform the market while search declines will continue for the next few years.

On the search front, Armstrong said that AOL is close to signing a new search partnership deal in the summer or early fall.

The company said domestic AOL subscribers to its Internet access service fell 26 percent while subscription revenue decreased 28 percent to $282.7 million year to year.

AOL's shares were down 11.9 percent, or $3.34, at $24.67 on the New York Stock Exchange in late morning trading. (Reporting by Jennifer Saba, editing by Maureen Bavdek and Gerald E. McCormick)