Time Warner profit up over 20 percent on cable...
Wednesday February 1, 10:53 AM EST
By Kenneth Li
NEW YORK (Reuters) - Time Warner Inc. (TWX) on Wednesday said fourth-quarter net income rose more than 20 percent, beating Wall Street estimates, on strong growth in feature films and high-speed Internet and digital phone services.
The world's largest media company, whose shares rose nearly 3 percent, also said earnings this year should increase at a high-single-digit percentage rate, in line with analysts' expectations.
Time Warner, which owns the Warner Bros. film studio, AOL and CNN, faces a proxy battle and threats to break up the company by a group of investors led by corporate raider Carl Icahn.
Time Warner has "a strong case going into this public debate about the performance of the company and the management," said analyst Christopher Marangi of Gabelli & Co., whose affiliate owns the company's shares.
Icahn, whose investor group collectively owns about 3 percent of Time Warner stock, this week lured former Viacom and Universal Studios Chief Executive Frank Biondi to head up the dissidents' slate of director nominees.
Biondi, who once headed the HBO cable network at Time Warner, has agreed to become the company's top executive, if elected to the board.
"We will continue to consider many strategic alternatives and initiatives to achieve even higher and more sustainable increases in share value," Time Warner Chief Executive Richard Parsons told analysts in a conference call.
But he added: "We cannot and will not experiment with the flavor of the day in the mere hope that it might be work or simply because we are impatient."
Quarterly net profit increased to $1.4 billion, or 29 cents per share, from $1.13 billion, or 24 cents per share, a year earlier, beating analysts' forecasts of 21 cents, according to Reuters Estimates.
Revenue rose 7 percent to $11.9 billion.
"I thought the results were pretty good," said Thomas Eagan, vice president of Oppenheimer research. "They were (generally) in line with our expectations, with cable outperforming our estimates on all fronts."
CABLE SERVICES GAIN
Revenue at Time Warner Cable rose 13 percent, and operating income before items increased 11 percent.
The company's basic video subscriber base grew by 34,000 from the third quarter to end the year at about 11 million.
Time Warner Cable added 265,000 residential high-speed Internet subscribers and 246,000 digital phone subscribers.
Revenue at the AOL online division fell 8 percent as it lost 625,000 subscribers in the quarter, ending the quarter with 19.5 million. But adjusted operating income before items increased 5 percent on higher online advertising sales.
In December, Internet giant Google Inc. (GOOG) agreed to purchase a 5 percent stake worth $1 billion in the division and to strike a broad ranging advertising partnership. Time Warner expects the deal to close in the first quarter.
Although the company did not provide financial expectations for the division, "AOL's adjusted OIBDA (operating income before depreciation and amortization) profile is likely to drop at the beginning of 2006 and then to increase as the year progresses," Time Warner Chief Financial Officer Wayne Pace said.
AOL struck a handful of partnerships in January to bundle its service with broadband access through cable and telephone companies to try to convert existing dialup modem subscribers to high-speed customers.
Time Warner's revenue from movies rose 11 percent, and profit increased 42 percent, boosted by the box office success of the latest Harry Potter film and DVD sales of "Batman Begins" and "Charlie and the Chocolate Factory."
Time Warner's adjusted OIBDA, a closely tracked performance metric, rose 18 percent to $2.9 billion.
For 2006, it forecast further OIBDA growth in the high-single digit percentage range from $10.3 billion in 2005.
"The guidance was very much in line with consensus expectations," Pali Research analyst Richard Greenfield said. "The real question will be if (the outlook) is conservative and the company can actually achieve double-digit growth or not."
Time Warner shares rose 48 cents, or 2.7 percent, to $18.01 in morning New York Stock Exchange trading.
The stock, like much of the media sector, has suffered from looming competition from other Internet companies and decelerating DVD sales growth. Shares have trailed the S&P 500 index by 12 percent over the past year.
Time Warner trades at 8.5 times estimated 2006 earnings before interest, tax, depreciation and amortization, compared with multiples of 9 for Walt Disney Co. (DIS) and 10 for the new Viacom Inc. (VIA).
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