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Time Warner Cable's Earnings Drop But Beat Expectations

The cable industry is still growing - but growth is slowing.

Time Warner Cable, like rival Comcast, continues to lose basic video subscribers to rivals like the telecom and satellite TV companies. Still, Time Warner Cable's quarterly earnings beat Wall Street expectations with higher revenue, five percent higher operating income and a whopping 19 percent increase in free cash flow. But earnings dropped from 92 cents a share to 76 cents a share, including four cents in restructuring charges. Weighing on the company is a major debt load it took on to pay a dividend to Time Warner when it spun off, creating a pure-play cable company in March 2009.

The nation's second largest cable company added 117,000 Internet subscribers and 62,000 residential phone subscribers, and has grown the revenue from both those subscriber groups. But it's basic video where rivals like Verizon's Fios are stealing Time Warner Cable's marketshare: total video subscribers fell by 84,000 in the quarter. In this current quarter the company's Chief Financial Officer, Robert Marcus, said the company's subscriber numbers are lower than the year-ago period so far. Marcus also said that with so much volatility in the market it's too soon to say how the quarter will end up.

The housing market has been really hard on the cable industry-- unprecedented high vacancy rates mean all those are households that wont pay for cable. Still, that should only improve moving forward.

Time Warner Cable's spin-off freed it from the volatility and unpredictability of the media business, putting it in contrast to its larger rival Comcast, as it reportedly pursues a deal with NBC Universal .

We'll see how that affects investors’ decisions as the Comcast-NBC Universal deal emerges.