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Time Warner posts 4Q profit despite ad drop

Wed, 02/03/2010 - 6:01pm
RYAN NAKASHIMA - AP Business Writer - Associated Press

Time Warner Inc. made a profit in the fourth quarter despite a decline in advertising revenue as the media company saw revenue gains in its cable channels such as HBO and its Warner Bros. movie studio, the one behind the "Harry Potter" franchise.

CEO Jeff Bewkes also played down the possibility of a video content deal for Apple Inc.'s new iPad computer, as he said device makers are "not particularly powerful" ways for the company to get movies and TV shows to consumers.

In a conference call with analysts, Bewkes favored adding value to cable TV subscribers who pay for such premium channels as HBO, and allowing them to watch programs online on any device for no extra fee, with a service called "HBO Go."

Companies such as Apple "are not distributors" but "device manufacturers," Bewkes said. "If they are not distributors, they are not particularly powerful in the chain."

However, he did hold out hope that Time Warner's magazine business could be helped by devices that serve as electronic readers. The company is part of a joint venture that is developing new ways of presenting publications digitally with color, video and games.

The company said it earned $627 million, or 53 cents per share, in the last three months of 2009. It lost $16 billion, or $13.41 per share, a year ago when the company was hurt by heavy write-downs on its cable, publishing and AOL assets.

The company spun off AOL into a separate company last month and shed Time Warner Cable Inc. earlier last year to focus on creative content rather than the businesses that deliver it to customers.

Revenue rose 2 percent to $7.32 billion, despite an 8 percent drop in ad revenue.

The company said quarterly advertising sales declined less than they did in the third quarter and would show further signs of improvement in the current quarter.

Excluding one-time items, the company said it earned 55 cents per share. Analysts polled by Thomson Reuters, who typically exclude such items, were looking for 52 cents. The revenue was also better than analysts' average forecast of $7.14 billion.

Shares were down 53 cents, or 1.9 percent, at $27.98 in afternoon trading Wednesday.

Time Warner's networks division, which includes HBO, CNN and Turner cable networks, saw its revenue rise 4 percent to $3.1 billion, as HBO added subscribers even as the division's ad revenue fell 4 percent.

Film revenue from its TV studio and Warner Bros. grew 7 percent to $3.3 billion, helped by "The Blind Side" and "Sherlock Holmes" in theaters while "Harry Potter and the Half-Blood Prince" and "The Hangover" contributed to home video results.

The publishing industry's advertising slump has been particularly painful for Time Warner magazines, which include Time, People and Sports Illustrated. The company's publishing revenue fell 13 percent in the fourth quarter.

Full-year earnings came to $2.47 billion, or $2.07 per share, as cost cutting and smaller accounting charges reversed a loss of $13.4 billion, or $11.23 per share. Revenue slipped 3 percent to $25.8 billion.

The company said it expects its earnings per share this year to grow on a percentage basis in the mid-teens from an adjusted figure of $1.83. That's roughly in line with the average forecast from analysts, which calls for a full-year profit of $2.12 per share.

The company is also raising its dividend 13 percent to an annual rate of 85 cents per share and increasing its stock repurchase plan.

Meanwhile, AOL Inc., newly released from its fizzled marriage with Time Warner, reported a profit for the fourth quarter on Wednesday, reversing a year-ago loss brought on by huge accounting charges.

AOL, which runs dozens of Web sites and a shrinking dial-up Internet access business, earned $1.4 million, or a penny per share, in the last three months of 2009. That compares with a loss of almost $2 billion, or $18.52 per share, a year earlier, which included $2.2 billion worth of one-time charges.

Revenue fell 17 percent to $809.7 million, reflecting smaller contributions from its two main sources, dial-up subscribers and online advertising.

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AP Business Writer Andrew Vanacore in New York contributed to this report.

(This version CORRECTS Corrects cable networks revenue to quarterly results in 12th graf, UPDATES share price. Moving on financial and entertainment services.)

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