Time Warner beats Street, eyes AOL spinoff
NEW YORK (Reuters) - Time Warner Inc (TWX.N) posted a stronger-than-expected quarterly profit, as a rise in cable network revenue helped offset declines in advertising sales at its AOL Internet and Time Inc publishing units.
Shares of the company, the first of the big U.S. media conglomerates to post results, gained 3 percent on Wednesday, after it also affirmed its 2009 outlook and said it anticipates spinning off one or more parts of AOL.
Other media stocks, including Walt Disney Co (DIS.N) and Viacom Inc (VIAb.N), also rose, with investor sentiment helped by government data that showed U.S. consumer spending increased in the first quarter.
Chief Executive Jeffrey Bewkes is trying to turn Time Warner back into a traditional media company consisting of cable networks like HBO, CNN and TNT, the Warner Bros film studio, and publishing units.
Bewkes said on a conference call that Time Warner will announce its plans for AOL's restructuring "very soon."
Wall Street sees the long-expected spin-off of AOL as a positive move strategically and financially.
"The best solution, in our opinion, is to spin off AOL in a tax-free transaction, which should remove some of the negative overhang caused by AOL on Time Warner's stock price," said Martin Pyykkonen, analyst at Wunderlich Securities.
Time Warner said it also notified Google Inc (GOOG.O) of its intention to buy back its 5 percent stake in AOL. Chief Financial Officer John Martin said the process could take a few months.
Bewkes completed the first major leg of his strategy to focus on content with the separation of its former cable unit, Time Warner Cable Inc (TWC.N) on March 12. The cable company also posted quarterly results on Wednesday.
BETTER PROFITS THAN EXPECTED
Time Warner's income from continuing operations was roughly flat at $555 million, or 46 cents a share, in the first quarter, compared with $548 million, or 46 cents per share, a year earlier.
EPS excluding items was 45 cents, down from 48 cents a year ago but higher than the average analyst forecast of 39 cents, according to Reuters Estimates.
"The results were pretty good overall," said Thomas Eagan, analyst at Collins Stewart. "The revenue was better than we expected."
First-quarter revenue fell 7 percent to $6.9 billion, but it was higher than the average analyst forecast of $6.75 billion, according to Reuters Estimates.
CFO John Martin said the current quarter will be the "most challenging from a growth perspective," as the company is hurt by continuing weak ad revenue and poor home video sales. Continued...
