Time Warner Inc plans to split off its cable services division to lift its sluggish stock price as it also reported quarterly earnings on Wednesday
NEW YORK: Time Warner Inc plans to split off its cable services division to lift its sluggish stock price as it also reported quarterly earnings on Wednesday that fell just short of Wall Street’s expectations.
Chief executive Jeffrey Bewkes has already taken steps to revamp the company, which also owns Time Inc and the Warner Bros movie studios. Time Warner has held discussions to merge its AOL online unit with Yahoo Inc, sources have said.
“We’ve decided that a complete structural separation of Time Warner Cable, under the right circumstances, is in the best interest of both companies’ shareholders,” Bewkes said in a statement. Time Warner owns about 84% of Time Warner Cable. Bewkes’s “statement provides some comfort to those expecting a separation,” said Christopher Marangi, a portfolio manager at Gamco Investors Inc, which owns Time Warner shares.
Now, investors will focus on AOL as another possible target for divestiture, Marangi added.
Time Warner’s first-quarter profit fell 36% to $771 million, or 21 cents per share, from
$1.2 billion, or 30 cents per share, a year earlier, when the company booked a big gain from the sale of AOL’s internet access business in Germany and the unwinding of its cable partnership with Comcast Corp.
Excluding an impairment charge for an investment in video game developer SCi Entertainment Group, profit was 22 cents per share, a penny below Wall Street forecasts compiled by Reuters Estimates.
A restructuring charge at New Line, which was folded into the company’s Warner Bros studio, cut another $116 million from profits, or about 2 cents per share.
Revenue rose 2% to $11.42 billion, matching analysts’ estimates. Adjusted operating income before depreciation and amortisation, or OIBDA, fell 1% to $3.1 billion.
AOL’s quarterly revenue fell 23% to $1.1 billion, and adjusted OIBDA fell 25% to $405 million, due to lower subscription revenue. Online advertising rose 1%.
Cable services revenue rose 8% to $4.2 billion, while OIBDA rose 7% to $1.4 billion. The division added 55,000 net additional new basic video subscribers in the quarter.
Overall, Marangi said, Time Warner had a “decent” first quarter.
Time Warner stock has lost a third of its value since the beginning of 2007 as AOL’s future continues to worry investors, who have also sent shares in the entire media-sector lower on fears of an advertising recession. News Corp stock has fallen about 19% over the same period.
For the full year, Time Warner affirmed an earlier earnings forecast of $1.07 to $1.11 per share from continuing operations. It also still expects adjusted OIBDA to rise 7% to 9% from a base of $12.9 billion in 2007.
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