Time Warner in Discussions About Selling Stakes of America Online

Nov 2, 2005  •  Post A Comment

Time Warner Chairman and CEO Richard Parsons confirmed Wednesday that the media giant is having conversations with a number of potential companies interested in buying a stake in America Online, but he warned there is no guarantee a deal will be struck.

“We are engaged in a series of exploratory discussions with a number of strategic partners that cover a range of potential commercial and strategic relationships,” Mr. Parsons said during a conference call to discuss Time Warner’s third-quarter earnings. He added he didn’t know whether a deal would be struck with anyone.

After being viewed for some time as an albatross around Time Warner’s neck, AOL has suddenly become one of the most sought-after properties in the online world. It has attracted interest from several big-name players, including Microsoft, Google, Comcast and Yahoo!-all of which have held talks with Time Warner about buying a stake in AOL in exchange for access to AOL’s massive customer and subscriber bases. These companies are also interested in taking advantage of the increasing advertising dollars being directed toward AOL-owned Web sites.

Although Mr. Parsons refused to discuss what sort of relationship with AOL the potential suitors are seeking, he did say that any partnership would be oriented more around strategic initiatives than toward unlocking any value in AOL.

Mr. Parsons also appeared to address some of the criticism lodged in the past by financier Carl Icahn, repeating that Time Warner’s current plan to sell just 16 percent of Time Warner Cable to the public is not changing. He did say the company may review and alter its holding of the cable unit if it makes sense later. Mr. Icahn has pushed for the company to completely spin off its cable unit.

The company also appears to have heard Mr. Icahn on the stock-repurchase issue, announcing Wednesday that it will boost its stock buyback plan to $12.5 billion from an initial plan of $5 billion. Mr. Icahn had pushed Time Warner to boost its repurchase program to $20 billion.

Those changes came as Time Warner posted an 80 percent surge in third-quarter profit to $897 million, on the strength of the company’s cable and networks divisions, which offset declines at the company’s film and AOL units. Revenue advanced 6 percent to $10.5 billion.

Time Warner Cable’s revenue rose 13 percent to $2.4 billion, while operating income climbed 17 percent to $512 million. The company attributed the growth to increases in subscription revenue and advertising revenue. Time Warner posted strong growth in high-speed data and telephony services and saw an increase in basic cable customers of 18,000.

The networks division, meanwhile, reported a 10 percent rise in revenue to $2.4 billion, reflecting higher content, subscription and advertising revenues. Operating income was up 22 percent to $699 million.

AOL posted a 5 percent decline in revenue to $2 billion, reflecting a decline in subscription revenue, which more than offset a gain in advertising revenue. Operating income was up 16 percent to $302 million.