Time Warner profit beats, but cuts outlook

NEW YORK Wed Nov 5, 2008 8:57am EST

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NEW YORK (Reuters) - Time Warner Inc posted a higher-than-expected third-quarter profit, helped by strong advertising sales at its cable networks including CNN, and the summer blockbuster movie "The Dark Knight."

But the media conglomerate, which also owns HBO and the Warner Bros movie studios, on Wednesday lowered its full-year outlook due to severance charges at its Time Inc publishing unit and restructuring charges at New Line Cinema.

Shares of Time Warner have fallen around 40 percent this year, hurt by the turbulent financial markets and by concerns that the weakening global economy would cut advertising revenue for media companies.

Even though the company reduced its full-year forecasts, the new estimates roughly matched Wall Street expectations, which reassured some analysts who had feared a bigger cut.

"Their outlook was OK to leaning positive," said David Joyce analyst at Miller Tabak.

Shares of Time Warner rose 1.6 percent to $11.00 in pre-market trading.

Third-quarter net income from continuing operations rose to $1.1 billion, or 30 cents per share, from $900 million, or 24 cents per share, a year earlier. Excluding items, profit was 31 cents per share, beating the average Wall Street forecast of 27 cents, according to Reuters Estimates.

Revenue was essentially flat at $11.7 billion, compared to analyst expectations of $11.86 billion.

Results were boosted by Time Warner's cable networks including CNN, which has benefited from high viewership ratings for its coverage of the U.S. presidential elections. Cable advertising and subscriber revenues grew by 9 percent and 10 percent respectively, the company said.

At the Warner Bros film studios, "The Dark Knight" Batman movie was one of the highest grossing films of all time and has to date taken in nearly $1 billion in worldwide theater sales. It helped to increase the division's income by 6 percent.

Time Warner Cable, which is 84 percent-owned by the media conglomerate, added more Internet, phone and digital video subscribers and reported a better-than-expected profit.

"Time Warner Cable was the standout for us with more cable services sold during the quarter than expected. It looks like the newer cable systems in Dallas and Los Angeles are becoming more of a factor," said Tuna Amobi, equity analyst at Standard & Poor's.

AOL, TIME INC WEIGH ON RESULTS

Investors have been disappointed by the performance of Time Warmer's AOL Internet division, which has lagged far behind competitors like Google Inc and Yahoo Inc. Time Warner has been in talks to combine AOL with Yahoo, sources familiar with the situation have said.

Profit was also dragged down by weak advertising at Time Inc magazines. The unit plans to cut as many as 600 jobs, or about 6 percent of its workforce.

"The biggest challenge remains AOL. It's the first quarter we've seen a decline at their Platform A ad service. It looks like their challenges are mounting every day," said Amobi. "Publishing was worse than we expected with more restructuring to be done there."

Time Warner forecast 2008 adjusted operating income before depreciation and amortization (OIBDA) to grow around 5 percent, down from its previous outlook of 7 percent to 9 percent growth. That was in line with the average analyst forecast for OIBDA of $13.5 billion in this year.

Full-year earnings per share from continuing operations will be in the range of $1.04 to $1.07, the company said. It had previously forecast $1.07 to $1.11.

Chief Executive Jeffrey Bewkes said in a statement that Time Warner had managed to perform well "in spite of the challenging economic environment, reflecting both our diversified revenue streams and our ability to make compelling branded content consistently."

(Additional reporting by Tiffany Wu; Editing by Lisa Von Ahn, Dave Zimmerman)

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