For media giant Time Warner Inc. (NYSE:TWX), content is king. That's the mantra of its board regarding its cable unit, Time Warner Cable Inc. (NYSE:TWC), which it spun off last month, setting the tone for its first-quarter earnings announcement Wednesday. The New York company exceeded Thomson Reuters expectations of 38 cents a share, registering 55 cents a share, or $661 million, on revenue of $6.95 billion.
The separation helped cut Time Warner's net debt to $10.4 billion from $20.7 billion at the end of 2008 due to a one-time dividend payout of $9.25 billion from Time Warner Cable.
The divestiture of Time Warner Cable leaves behind a company with a diverse content group composed of cable networks, filmed entertainment, publishing and its troubled online AOL unit. CEO Jeff Bewkes is satisfied with the performance of his smaller company especially with its more targeted focus:
"I'm pleased that our content group grew adjusted (operating income before depreciation and amortization) by 3% during the quarter -- despite a challenging economic environment that's affecting all of our businesses, particularly advertising at our AOL and publishing segments. Our results keep us firmly on track to achieve our full-year business outlook."
Time Warner's next mission is to finally determine the fate of its AOL division, which it merged with in an ill-fated $106 billion deal in 2000. AOL's decline was apparent in the first quarter as its revenue decreased 23% to $867 million, attributed to a 27% fall in subscription revenues and a 20% decline in advertising revenues. It's not a matter of if a deal will take place but when and how. Bewkes said Time Warner is just "working to determine the right ownership structure for AOL."
Time Warner had already been positioning itself for some kind of deal when bondholders approved an amendment for outstanding debt of $12.3 billion, and AOL chairman and CEO Randy Falco and president and COO Ron Grant were replaced with nine-year Google Inc. (NASDAQ:GOOG) vet Tim Armstrong, Corporate Dealmaker
reported last week. -
Gerald MagpilyTime Warner press releaseSee Corporate Dealmaker: Time Warner closer to AOL spinoff or saleSee AOL & Time Warner's marriage: Decade of The Deal
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