Time Warner Posts Q1 Profit With Strong Results From Cable Unit

May 3, 2006  •  Post A Comment

Media giant Time Warner posted first-quarter net income of $1.5 billion Wednesday, up 59 percent from a year ago, as strength at the company’s cable and television networks businesses compensated for weakness at AOL and the film and publishing units.

Combined with a series of one-time gains related to investments in Time Warner Telecom, a satellite company and the sale of two aircraft, Time Warner’s earnings on a per-share basis soared to 32 cents from 20 cents a year earlier, easily surpassing Wall Street estimates of between 19 cents and 21 cents per share.

Revenue was flat at $10.5 billion, compared with $10.4 billion a year ago, however, because of continued weakness at AOL, which is losing dial-up subscribers at a faster pace than it is increasing online advertising dollars.

The cable unit proved again to be the main driver of growth, posting double-digit gains in both operating income and revenue as a result of strong growth in high-speed Internet and telephone services. The unit reported a 15 percent increase in revenue to $2.6 billion, while operating profit surged 25 percent to $501 million, fueled by the addition of 240,000 digital-cable subscribers, 346,000 new high-speed Internet customers and 270,000 new cable telephone subscribers. Basic cable subscriptions grew by 82,000-the highest in six years and far more than the year-earlier growth of 26,000.

The television networks division posted a 3 percent rise in revenue to $2.8 billion, while operating profit climbed 7 percent to $788 million. The company attributed the growth to higher advertising revenue at TBS and TNT and subscriber-fee payments made by cable and satellite companies to the unit’s various channels. That offset a decline in advertising revenue at The WB Network and the absence this year of revenue from “Everybody Loves Raymond,” which ended its run last year.

The results come as Time Warner Chairman Richard Parsons continues to move toward boosting the company’s performance in the wake of a proxy battle last year with billionaire financier Carl Icahn, who criticized Time Warner executives for poor management of the company. Though Mr. Parsons ultimately won that fight, he has committed himself to improving the company’s financial results, and on Wednesday announced the company was boosting its stock buyback program to $20 billion-a proposal Mr. Icahn pushed during the proxy battle.

William Drewry, a media analyst for Credit Suisse, said in a research note Wednesday that while some Time Warner units fell short of his projections, the company’s cable unit and overall profit and revenue figures surpassed his estimates.

Prior to the release of the earnings he noted that AOL and the publishing unit were “still the hot buttons in terms of the ‘wall of worry’ that [was] overhanging the stock.” Following the release of the financial results, he said, both divisions fell short of his estimates.

AOL’s revenue fell 7 percent to $2 billion, while operating profit tumbled 14 percent to $269 million, weighed down mainly by subscriber losses. Advertising revenue jumped 26 percent to $81 million.

Box-office numbers were down compared with last year, leading the company’s film division to report an 8 percent decline in revenue to $2.8 billion, though operating profit for the film division jumped 22 percent to $368 million, driven by the release of several DVD titles. Publishing revenue was flat at $1.1 billion, while operating profit for publishing fell 13 percent to $71 million due to weak sales of several international titles.