Time Warner Net Income Falls, Predicts Growth in 2008

Time Warner Net Income Falls, Predicts Growth in 2008

Feb. 6 (Bloomberg) -- Time Warner Inc., the world's largest media company, said fourth-quarter profit fell 41 percent from a year earlier, when it recorded tax and asset sale gains. The company forecast earnings growth of as much as 9 percent in 2008.

Net income declined to $1.03 billion, or 28 cents a share, from $1.75 billion, or 44 cents a share, the previous year, the New York-based company said today in a statement. Excluding some items, results matched the 29-cent average of 17 analysts' estimates compiled by Bloomberg. Sales advanced to $12.6 billion.

Chief Executive Officer Jeffrey Bewkes, who took over from Richard Parsons on Jan. 1, is tasked with reversing a slide in Time Warner stock, the 10th worst performer in the Standard & Poor's 100 Index last year. Some investors are calling for him to sell a remaining stake in the cable systems unit and try to shed parts of AOL, a move that may be complicated by Microsoft Corp.'s $44.6 billion bid for Yahoo! Inc. last week.

``The company needs to be simplified,'' said Matt Kaufler, a fund manager at Clover Capital Management Inc. in Rochester, New York, which holds 1.2 million Time Warner shares among its $2.6 billion in assets. ``They've had years to contemplate their strategy.''

Time Warner, down 29 percent in the past 12 months, fell 44 cents to $15.40 yesterday in New York Stock Exchange composite trading.

Excluding tax benefits and a gain from selling assets, the company earned 22 cents a share in the fourth quarter of 2006.

Bewkes is pushing a strategy to offer AOL e-mail and search services free to consumers to boost advertising on the site. AOL bought five businesses in the past year to increase its ad revenue and compete with Yahoo and Google Inc.

`Dearth of Buyers'

``One of the big investment questions is AOL, particularly after the Microsoft and Yahoo news,'' Dan Poole, who helps manage more than $30 billion, including Time Warner shares, at National City Bank in Cleveland, Ohio, said in an interview with Bloomberg Television. ``It takes two bidders out of the space. Right now, you have a dearth of buyers.''

Microsoft's bid for Yahoo makes a partial sale, spinoff or partnership for AOL less likely, Lehman Brothers Holdings Inc. analyst Anthony DiClemente said in a Feb. 1 report. DiClemente, who is based in New York, values AOL at $16.6 billion.

Without its AOL, cable systems and publishing divisions, Time Warner would focus on movie and cable-TV channel assets and resemble Viacom Inc., the owner of MTV Networks and the Paramount film studio. Viacom, which split off its CBS Corp. radio and broadcasting unit in December 2006, advanced 7 percent last year.

Viacom, controlled by Sumner Redstone, trades at nine times its projected 2008 earnings before interest, taxes and non-cash expenses, compared with seven times for Time Warner, according to Chris Marangi, a Rye, New York-based fund manager at Gamco Investors Inc.

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