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Time Warner reports 34% jump in earnings, cites cable business

February 01, 2007|Thomas S. Mulligan | Times Staff Writer

With strong cable-TV results leading the way, Time Warner Inc. on Wednesday reported a 34% surge in fourth-quarter profit.

The world's largest media company, parent of Warner Bros. Studios, CNN, HBO and Time magazine, posted net income of $1.75 billion, or 44 cents a share, up from $1.3 billion, or 28 cents, a year earlier.

Profit was fattened by a $769-million gain on the sale of AOL Internet access businesses in Europe, as well as $900 million in tax benefits.

Sales for the quarter rose 8% to $12.5 billion from $11.5 billion.

Chief Executive Richard D. Parsons, in a conference call with analysts and reporters Wednesday morning, called 2006 "a pretty good year," in which Time Warner had achieved its financial and strategic goals.

In 2007, Parsons said, the company plans to roll out an Internet phone service aimed at small and medium-sized businesses, some advanced digital advertising services and a wireless Internet service.

New York-based Time Warner also will continue integrating the cable TV systems purchased from Adelphia Communications Corp. last year and will keep pursuing its strategy of transforming AOL from a subscriber-based to an advertising-based business model, Parsons said.

Time Warner Cable Inc. earnings rose 46%, helping to validate the $16.7-billion Adelphia purchase.

"Cable continues to deliver the bulk of the free cash flow," said Tuna Amobi, an equity analyst at Standard & Poor's in New York. "There are still some challenges with AOL ahead. It's going to be a testing year for AOL."

Profit before one-time items was 22 cents a share, matching the average estimate of 17 analysts polled by Bloomberg.

Shares of Time Warner fell 17 cents to $21.87.

A year after fending off a campaign by billionaire Carl Icahn to break up the company, Parsons, 58, is starting to reap the benefits of keeping the assets together. He implemented a $20-billion share buyback at Icahn's urging, boosting per-share earnings. Revenue in 2006 rose 4% to $44.2 billion while net income more than doubled to $6.6 billion.

Profit in 2007 will be about $1 a share, including 10 cents for a gain in the sale of an AOL unit in Germany, Time Warner said. Adjusted operating income before depreciation and amortization will rise in the "mid-to-high teens" from $11.1 billion last year, the company said.

Earnings will rise at each unit in 2007, Parsons said on a conference call. In 2006, operating profit fell at three of Time Warner's five businesses: AOL, the film unit and the magazine publishing group.

Stamford, Conn.-based Time Warner Cable lured customers with packages of cable, high-speed Internet access and broadband services. About 1.5 million subscribers, or 10% of the total, subscribe to the so-called triple-play package.

"The Adelphia deal looks like a multibillion-dollar bet that was well-timed," said Larry Haverty, an associate portfolio manager at Gamco Investors Inc. in Rye, N.Y.

*

thomas.mulligan@latimes.com

Bloomberg News was used in compiling this report.

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