Time Warner to Split AOL in Two, Slash Costs
Time Warner is working on splitting AOL's audience and access businesses and running the
two as independent entities, Chief Executive Jeffrey Bewkes said.
"This should significantly increase AOL's strategic options," Bewkes told analysts on a conference call.
Bewkes also said the company's 84 percent ownership stake in Time Warner Cable Inc
Time Warner shares leaped more than 4.5 percent Wednesday.
Earlier in the day, Time Warner forecast profit growth to slow but possibly exceed analyst estimates in 2008 after reporting quarterly earnings that reflected increases in broadband and phone subscribers and sales of "Harry Potter" and "300" home videos.
The media conglomerate, which owns AOL, CNN and Time, said it expected adjusted operating income before depreciation and amortization to rise 7 percent to 9 percent this year, which could exceed Wall Street's forecast of 7 percent growth.
This compares with growth of 17 percent in 2007.
Time Warner will "immediately" cut over 15 percent of corporate costs across the board to increase margins and profitability, Bewkes said.
Bewkes told analysts on a conference call that the cuts would reduce the company's run rate by $50 million a year. One of the company's films studios, New Line Cinema, will also see near-term cost cuts, he said.
"We need to increase our current margins and profitability by better managing our costs, among other things, and on the costs side we're going to do that across the company, and to set the right tone, we're starting at corporate," Bewkes said.
Earnings Rise, Including Items
Time Warner said fourth-quarter profit fell to $1 billion, or 28 cents per share, from $1.8 billion, or 44 cents per share, a year earlier when it logged a big gain from sales of AOL units and other items. Excluding the benefit, the year-ago profit was 22 cents a share.
Revenue rose 2 percent to $12.64 billion, matching the analysts' average forecast, according to Reuters Estimates.
AOL's revenue fell 32 percent, dragged down by a loss of 740,000 subscribers and offsetting a 13 percent rise in film division revenue.
Adjusted operating profit at AOL rose 29 percent, while online advertising growth, a closely watched barometer of progress for the division's restructuring, rose 10 percent.
Time Warner Cable Fourth-Quarter Profit Rises
Time Warner Cable, the second-largest U.S. cable operator, Wednesday posted a 23 percent rise in fourth quarter profit from higher broadband and phone customers.
Net profit rose to $327 million, or 33 cents per share, from $266 million, or 27 cents a share, a year earlier.
Revenue rose 12 percent to $4.1 billion from $3.65 billion.
Wall Street analysts had been on average been expecting net profit of 31 cents per share on revenue of $4.13 billion, according to Reuters Estimates.
Time Warner Cable is 84 percent-owned by media conglomerate Time Warner, which spun off a 16 percent stake a year ago as partial payment for cable systems it bought in July 2006 from bankrupt operator Adelphia Communications.