| NEW YORK
NEW YORK Time Warner Inc on Wednesday forecast
2008 profit growth to match or beat Wall Street estimates and
took the first steps toward restructuring what until recently
was the world's biggest media company.
These moves involve cost cuts across the company, starting
with eliminating 100 jobs from its corporate offices to save
about $50 million a year.
Time Warner also plans to split the AOL Internet division's
dial-up business, which is losing subscribers, from a growing
Web site and advertising business -- a move that could make a
sale or spin-off easier.
Time Warner will begin discussions to possibly spin off its
84 percent stake in Time Warner Cable.
The company will also seek to cut costs at its New Line
Cinema studio, known for the "Lord of the Rings" franchise and
"Hairspray," and review its current structure as an independent
Time Warner shares rose as much as 5 percent on Wednesday.
They had lost as much as 36 percent since their most recent
52-week high in June 2007.
The media conglomerate is under pressure to revive its
ailing stock price and come up with a new strategy for AOL as
it faces potentially stronger competition if Yahoo Inc accepts
a $45 billion offer from Microsoft Corp.
"We'll make sure that Time Warner has the right businesses
in the right structure," newly appointed Chief Executive
Jeffrey Bewkes said. "In change lies opportunity."
Time Warner said fourth-quarter profit fell to $1 billion,
or 28 cents per share, from $1.8 billion, or 44 cents per
share, a year earlier, when it logged a big gain from sales of
AOL units and other items.
Excluding special items, earnings were 29 cents a share,
matching the analysts' average forecast, according to Reuters
Estimates. Year-earlier profit, excluding the gain, was 22
cents a share.
Revenue rose 2 percent to $12.64 billion, in line with
"The numbers were slightly above our expectations across
the board, led by cable," said analyst Christopher Marangi of
Gabelli & Co, which owns shares of Time Warner.
The media conglomerate, which owns AOL, CNN and Time Inc,
forecast adjusted operating income before depreciation and
amortization to rise 7 percent to 9 percent this year, which
could exceed Wall Street's forecast of 7 percent growth.
While its 2008 profit growth is sharply lower than 2007's
17 percent rise, that is largely due to Time Warner Cable's
purchase of Adelphia cable systems, which closed in mid-2006.
Excluding gains from that deal, 2007 growth would have been 8
"Given the low valuation, negative sentiment and potential
for positive restructuring news flow, (Time Warner) appears to
be a safe place in the coming months," Bernstein Research
analyst Michael Nathanson said in a research note.
A deal between Microsoft and Yahoo could eliminate two
potential partners or buyers of AOL but raise the valuations of
online assets. It could also redraw the Web ad landscape and
consolidate power between Microsoft and Google Inc.
Bewkes told analysts on a conference call that Time
Warner's move to separate AOL's operations "should
significantly increase AOL's strategic options."
AOL was restructured last year to become a one-stop shop
for Web advertising. First-quarter online ad sales are expected
to fall, but growth is expected to return by the second
quarter, Chief Financial Officer John Martin told analysts.
Bewkes also said the company is starting negotiations with
Time Warner Cable over a possible spin-off of its 84 percent
stake. Talks will likely conclude by the time it reports
first-quarter earnings, executives said.
The current ownership structure is "less than optimal" for
both companies, Bewkes said.
In response to a question, Bewkes did not rule out the
possibility of buying back Time Warner Cable, which has lost
nearly half of its market value on threats of more competition
from telephone companies and a possible U.S. recession.
AOL ADVERTISING TO GROW
Once the world's largest media company by market
capitalization, Time Warner has lost that title to News Corp as
its shares fell over the past year on concerns about AOL and
the weakening U.S. economy's impact on cable.
News Corp and Walt Disney Co reported quarterly results
this week that handily beat Wall Street forecasts on nearly
every front and said they saw no signs of a possible recession.
Time Warner has not given up on AOL yet. On Tuesday, it
purchased buy.at -- its fifth online advertising-related
acquisition in 12 months.
AOL's quarterly revenue fell 32 percent, dragged down by a
loss of 740,000 subscribers, while adjusted operating profit
rose 29 percent. Online ad growth, a closely watched barometer
of progress for the division's restructuring, rose 10 percent.
Movie studio revenue rose 13 percent, while operating
profit before items increased 46 percent, boosted in part by
the box office sales of the film "I Am Legend."
Time Warner said it expected 2008 earnings per share of
$1.07 to $1.11 from continuing operations, below Wall Street's
projection of $1.12.
AOL's adjusted operating profit could reach 2007 levels,
but could also be down slightly.
Time Warner Inc stock rose 3 percent, or 46 cents, to
$15.86 in late afternoon trading on the New York Stock
Time Warner Cable's shares were down 2.8 percent, or 67
cents, at $23.73 after it gave a weaker 2008 outlook.
(Additional reporting by Gina Keating in Los Angeles)
(Editing by Lisa Von Ahn, Maureen Bavdek, Gary Hill)