Time Warner profit up on cable and "Harry Potter"

By Kenneth Li

NEW YORK (Reuters) - Time Warner Inc (TWX.N) on Wednesday posted a higher quarterly profit, matching expectations, on strong box office results for the latest "Harry Potter" film and an increase in subscribers to its package of digital cable services.

The company also forecast double-digit earnings-per-share growth in 2008, and its shares edged up amid a broad market sell-off.

The results came two days after the world's biggest media company named President Jeffrey Bewkes as chief executive, effective January 1. The move has stoked expectations of more aggressive structural changes.

Also on Wednesday, Time Warner's AOL online unit said it would purchase advertising technology company Quigo, a deal one source said was worth about $340 million.

Time Warner's third-quarter profit rose to 24 cents per share from 19 cents a year earlier, excluding special items in both periods.

Net income fell to $1.1 billion, or 29 cents per share, from $2.3 billion, or 57 cents per share, a year earlier, when the company took several large gains.

Revenue rose 9 percent to $11.7 billion, ahead of Wall Street expectations of $11.33 billion, according to Reuters Estimates.

"The results were pretty good," Oppenheimer & Co analyst Tom Eagan said. Strong growth in new digital phone and high speed Internet customers offset a worse-than-expected decline in basic video customers at the cable division, he added.

Chris Marangi, an analyst at Time Warner shareholder Gabelli & Co, said he wanted to hear more about AOL's progress.

AOL revenue fell 38 percent to $1.2 billion as the sale of Internet access businesses in the United Kingdom, France and Germany drove subscription revenue down 56 percent. The company restructured its business last year by offering most of its services for free to boost online advertising sales.

The subscription revenue decline offset a 13 percent rise in AOL's advertising sales. Time Warner shares had fallen after the unit reported second-quarter ad revenue growth of 16 percent, compared with percentage gains of more than 40 percent in the prior four periods.

Bear Stearns analyst Spencer Wang said AOL's ad growth was ahead of his estimate of 11.4 percent.

CABLE AND MOVIES

Cable division revenue rose 25 percent to $4 billion. The company added 220,000 net new customers who took a combination of digital phone, video and broadband services.

But basic video subscribers decreased by 83,000 during the quarter, following a cable industry trend amid tougher competition against phone companies offering similar services. The majority of the declines came from newly acquired systems.