Time Warner said its third-quarter net income fell because of comparisons with big gains it recorded a year ago and lower earnings at its AOL unit. Revenue rose.
In Wednesday’s earnings announcement, Time Warner Cable also reported a drop in earnings as it lost more basic video subscribers than expected. The cable unit posted a big gain due to acquisitions of cable systems a year ago that affected its earnings comparison.
Time Warner’s net income was $1.1 billion, or 29 cents a share, down 53% from $2.32 billion, or 57 cents, a year ago. Adjusted operating income before depreciation and amortization climbed 15% to $3.2 billion.
Revenue rose 7% to $11.7 billion.
Analysts said Time Warner’s numbers were better than expected.
“This performance keeps us squarely on track to meet all of our full-year financial objectives,” said Time Warner Chairman-CEO Dick Parsons. “The company’s profit growth reflected double-digit increases at our cable, filmed entertainment and publishing businesses.
“We look forward to a strong finish to this year, and we’re confident in our growth prospects for 2008,” he added.
Earlier this week, Time Warner announced that Mr. Parsons will step down as CEO at the end of the year. He will be succeeded by President-Chief Operating Officer Jeff Bewkes.
AOL’s operating income fell 24% and revenue fell 38% as the unit continued its shift to an ad-based model from a subscriber-based business. Ad revenues rose 13%, down from last quarter’s 16% growth rate.
“AOL ad growth may be a little bit of a disappointment compared to your expectations,” Mr. Parsons told analysts on the company’s earnings conference call. But he said he was pleased with management’s efforts to integrate AOL’s advertising capabilities.
AOL on Wednesday said it bought Quigo, a contextual ad targeting company. The addition should give the company “the most advanced and diverse set of advertising products in the industry,” Mr. Parsons said.
In the network group, which includes Turner Broadcasting and HBO, revenues rose 6% to $2.6 billion.
Advertising revenues at Turner were up 10%. Adjusted operating income before depreciation and amortization grew 6% to $830 million. The gain reflected mostly higher subscription revenues, offset by higher programming and marketing expenses. Total ad revenues were lower because of the shutdown of the WB Network.
Time Warner Cable said net income fell to $248 million, or 25 cents per share, from $1.2 billion, or $1.20 per share a year ago. Revenues rose 25% to $4 billion.