Time Warner takes steps to restructure as shares rise

By Kenneth Li

NEW YORK (Reuters) - Time Warner Inc (TWX.N) 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 (TWC.N).

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 studio.

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 (YHOO.O) accepts a $45 billion offer from Microsoft Corp (MSFT.O).

"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 Street forecasts.

"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 percent.

"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.