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Quarterly profit beats forecasts

November 06, 2008|times wire services

Time Warner Inc. reported third-quarter profit that beat Wall Street expectations, even as its AOL online unit continued to weigh down the company with a 6% decline in advertising revenue.

The media conglomerate saw growth in its cable-access and cable-network businesses.

But its Time Inc. magazine unit showed weakness. Revenue fell 17% in the AOL unit. And revenue dropped 9% at the Warner Bros. movie division compared with a strong 2007 period led by a "Harry Potter" sequel. That result came despite the high-profile theatrical release of the Batman sequel "The Dark Knight," which has grossed more than $527 million this year.

Overall, Time Warner reported net income of $1.07 billion, or 30 cents a share, roughly in line with the $1.09 billion, or 29 cents, it earned a year earlier.

The company reported 18% growth in profit from continuing operations. Excluding various one-time charges, profit was 31 cents a share and beat the 27 cents a share estimated on average by analysts polled by Thomson Reuters.

Revenue was essentially flat at $11.71 billion, compared with $11.68 billion a year earlier, and below analysts' expectations of $11.9 billion.

Time Warner lowered its full-year outlook partly to reflect the $100 million to $125 million it will spend in the fourth quarter on severance and other costs related to planned job cuts in the magazine unit. The company plans to lay off 6% of its workforce, or more than 600 positions, producing annual savings of at least $150 million starting next year.

At AOL, advertising revenue fell in the third quarter, the first drop since AOL began transforming itself into an advertising company in late 2004. Ad revenue grew 41% in 2006 and 18% in 2007 and was flat the first half of 2008.

At Warner Bros., revenue dropped despite the success of "The Dark Knight" and the DVD release of "Sex and the City." Time Warner said the 2007 comparison period was particularly strong, with "Harry Potter and the Order of the Phoenix," "Rush Hour 3" and "Hairspray" in theaters and "300" on DVD.

In lowering its full-year outlook, Time Warner said that on top of the Time Inc. restructuring costs, it incurred about $182 million in charges, mostly for the February absorption of the New Line Cinema studio by Warner Bros.

Time Warner now expects profit of $1.04 to $1.07 a share this year, down from its previous outlook of $1.07 to $1.11 a share provided in February. Analysts have been expecting $1.07 a share.

Shares of Time Warner fell 68 cents to $10.15.

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