Time Warner executives had to answer numerous questions last week about its troubled AOL unit as Internet ad sales slowed.

The company reported higher second-quarter earnings as its cable, publishing and networks businesses saw gains. Time Warner's net income for the quarter was $1.1 billion, or 28 cents per share, up from $1.0 billion or 24 cents per share a year ago. Revenues rose 6 percent to $11 billion.

But much of the focus at Time Warner in recent years has been on AOL, which has suffered since customers began switching from AOL's dial-up service to broadband. Last year Time Warner announced that AOL would be switching from a subscription model to an advertising-based model.

Last quarter, AOL posted a 40 percent gain in ad sales. But this quarter, the gain was just 16 percent and management warned that ad sales might not, as forecast in the past, keep up with the industry average over the rest of the year.

In a conference call with analysts Wednesday, Time Warner Chairman-CEO Dick Parsons said the ad slow-down was partly the result of an anniversary of a large ad deal done last year. But AOL also has been making changes on many of its main channels, including health, music and autos, and making improvements to its search and e-mail products.

Wait-and-See Attitude

"The kinds of upgrades often lead, at the beginning, to a slowing of traffic and monetization," Mr. Parsons said. It takes users a little time to become accustomed to the redesigned pages, while advertisers "naturally want to see how the new programming performs before reinvesting significantly."

Mr. Parsons said he expected AOL's page views to begin to increase year-over-year, and noted that for the first time since 2005, AOL had an increase in page views from the previous quarter.

"AOL's management team will continue making these types of significant programming and product enhancements," he said, pointing to recently relaunched news, sports and shopping areas and a new AOL home page. The real estate and money and finance sections are due to be updated.

Mr. Parsons said the change in guidance on AOL ad sales was designed to allow management to make the necessary improvements. "We don't manage this company for the guidance. We manage this company according to the business imperatives and for the long-term growth and sustainability of our business," he said. "We remain confident we're on the right track. AOL is in fact reasserting itself as a leader in the online advertising space."

In the second quarter, AOL revenues were down 38 percent to $1.3 billion. Subscription revenues were down 55 percent, while ad revenues rose 16 percent, which was much smaller than in prior quarters.

Adjusted operating income before depreciation and amortization dropped 2 percent to $485 million.

Company officials pointed to an increase in page views as a sign that new programming on the site was attracting viewers, but said that new items on the site, including a new search module, had prompted some advertisers to take a wait-and-see approach during the quarter.

Cable revenues rose 49 percent to $4 billion because of systems acquired from Adelphia Communications and Comcast. Operating income increased 41 percent.

"We expect cable to continue to be a powerful generator of growth for years to come," Mr. Parsons said TW Cable still has headroom in residential business on its old systems, and even more to realize on its newly acquired systems. He also said there was significant opportunity in the small to midsized commercial markets, and long-term potential in advanced advertising.

The company said it was involved with Insight Communications' plans to explore strategic alternatives for its cable business.

"We like the cable business, and we think we have the flexibility now, given the structure of our cable company, to participate in the ongoing consolidation of that space, and we've got a new currency we can use in connection with that," he said.

Time Warner's networks group, which includes Turner Broadcasting and HBO, posted a 1 percent decline in revenues, due mainly to the shutdown of The WB network.

Ad revenues at Turner were up 6 percent.

Time Warner President and Chief Operating Officer Jeff Bewkes said Turner networks outperformed most other cable networks in the upfront. He pegged the industry as posting mid-single-digit gains, while TNT and TBS were up in the high single digits to low double digits. "That's true of both pricing and of dollar volume, because we kept sellout roughly where it was."

He added that Court TV and Adult Swim were strong, but because of weakness in the kids market, Cartoon Network would be unlikely to show any improvement over last year.

Adjusted operating income before depreciation and amortization for the networks group was up 10 percent to $746 million as subscription revenue increased and The WB losses were removed. The quarter also included $16 million in restructuring and severance charges at HBO and a $34 million non-cash charge because of the impairment of the Court TV trade name as a result of rebranding the network as truTV, to take effect in January.

In the third quarter, CFO Wayne Pace said, margins will shrink for the network group because of higher programming costs incurred by new sports deals at Turner, related marketing expenditures and the cost of studio output deals at HBO.

Time Warner reaffirmed its previous guidance on operating income, cash flow and earnings.

Spencer Wang, analyst at Bear Stearns, said Time Warner's overall financial performance was better than expected. But he warned that some of the numbers, notably AOL's slow ad growth and a decline in Time Warner Cable basic subscribers, "could be a drag on the stock in the near term."

Time Warner, which recently completed a $20 billion stock repurchase plan, recently increased its dividend and said its board authorized an additional $5 billion in stock buybacks.