Time Warner profit beats Street, eyes AOL spinoff


June 18, 2010 Updated Apr 29, 2009 at 2:11 PM EDT

* Q1 profit ex-items and revenue beat expectations

* Cable networks rev up; AOL, publishing rev down

* Reaffirms 2009 outlook, anticipates AOL spin-off

* Shares rise 3 percent; other media stocks also higher

(Adds executive and analyst quotes, other media shares)

By Yinka Adegoke

NEW YORK (Reuters) - Time Warner Inc
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 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 and
Viacom Inc, 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 of
its intention to buy back its 5 percent stake in AOL. Chief
Financial Officer John Martin said the process could take a few

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 on March 12. The cable company
also posted quarterly results on Wednesday.


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

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.

Revenue at AOL fell 23 percent to $867 million, while
revenue at Time Inc fell 23 percent to $806 million. Warner
Bros revenue fell 7 percent to $2.6 billion, primarily due to
lower DVD sales.

Revenue at the cable networks unit rose 6 percent to $2.8
billion, thanks to a 9 percent rise in subscription revenues
which offset a 2 percent decline in advertising revenues.

"I felt that publishing was way worse than I expected but
it was offset by networks, which was in line with our
expectations," said Tuna Amobi, equity analyst at Standard &
Poor's. "It's hard to see how the new content group can
jump-start growth going forward." The company's earnings are
more volatile without cable's steady cash flows, he added.

Time Warner affirmed its full-year 2009 outlook, saying its
adjusted earnings per share would be flat with 2008 at around

Shares of Time Warner rose 61 cents or 2.8 percent to
$22.38 on the New York Stock Exchange. Disney rose $1.45 or 7.4
percent to $20.96 while Viacom rose $1.28 or 6.27 percent to
(Reporting by Yinka Adegoke; Editing by Gerald E. McCormick
and Tiffany Wu)

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