Time Warner to spinoff cable division

NEW YORK — Time Warner Inc. said Wednesday it will completely spin off its cable business, seeking to improve performance by separating Time Warner Cable from the world's largest media company.

Many investors had sought the move to streamline the sprawling conglomerate, which also includes AOL, networks CNN and HBO, the Time Inc. magazine family and the Warner Bros. film studio.

Chief Executive Jeffrey Bewkes announced the widely anticipated decision as Time Warner released first-quarter financial results largely in line with Wall Street expectations.

The company reported earnings of $771 million, or 21 cents a share, down 36 percent from the $1.2 billion, or 31 cents a share, a year ago. Last year's results had been boosted by the sale of AOL's Internet access business in Germany.

Bewkes said he expects the terms of the cable spin-off to be finalized "very soon," but revealed few details.

"Under the right circumstances, a complete structural separation is in the best interest of Time Warner shareholders and Time Warner Cable shareholders," Bewkes said in a conference call with analysts.

"We continue to be very optimistic on the prospects of the cable company and the cable industry," Bewkes said. But, he said, the two companies would be "more valuable if separated."

Since Bewkes took charge of New York-based Time Warner in January, investors have looked to him to revive its long-stagnant stock price by slimming down and reshaping the company.

Bewkes and other executives had long considered shedding Time Warner's remaining 84 percent stake in the cable company, which is the conglomerate's largest operating division and the No. 2 cable provider after Comcast Corp.

At a separate event Wednesday for Time Warner's Time Inc. properties, executives praised a recent online video strategy for CNNMoney.com. The site, CNN's online business arm that includes content from Time's Money and Fortune brands, has been producing about two dozen original videos each day since January.

The video push has enhanced the site over all, said Jonathan Shar, the site's general manager. He said the number of site visitors in the first quarter was up 27 percent over the same period last year.

Elsewhere online, Time Warner faces a struggle with AOL, which has had a rough time transforming itself from a dying dial-up access business into an Internet service supported by online advertising.

AOL reported weak quarterly results Wednesday, with revenues falling 23 percent as subscribers continued to flee, shrinking the U.S. total to 8.7 million members. Slowing growth of ad revenue, rising 1 percent, could not offset the decline.

Bewkes said in February that Time Warner would split AOL's access and advertising businesses, a move widely seen as a prelude to a possible sale of AOL or its parts.

He said Wednesday that preparations for the split should be complete by the end of June.

Selling AOL, which acquired Time Warner in 2001 in a disastrous merger, would bring the company full circle.

But making that happen is complicated by Microsoft Corp.'s unsolicited offer to buy Yahoo Inc., a deal that could reduce the field of possible AOL suitors.

Revenues at Time Warner Cable rose 8 percent in the quarter to $4.2 billion, with a strong performance adding basic video subscribers.

For the cable networks division, which includes HBO, CNN, TBS and TNT, profits were up 2 percent with revenues up 10 percent to $2.7 billion.

On the movie side, revenues were up 4 percent, boosted by the home video sale of "I Am Legend," but profits fell because of charges related to reorganizing New Line Cinema to be run under Warner Bros.

LINKS:

Time Warner: www.timewarner.com

Time Warner Cable: www.timewarnercable.com

David Ho is a New York correspondent for Cox Newspapers.