Time Warner (TWX) came in above analysts expectations as generated just below $11 billion in revenue for the quarter, with profits of $1.07 billion and 28 cents a share. That's in contrast to last years' $1.01 billion and 24 cents a share. Overall revenue grew by 6 percent.
Cable pretty much saved the quarter for Time Warner, as its revenue grew by 15.4 percent to reach $2.7 billion. They ended up with 11.5 million basic subscribers, an increase of 1.4 percent for the middle of 2005. As with most cable companies, their key growth still came from their triple-play sales of phone, broadband and digital cable services.
One problem that was self-originated with the company was its expectations concerning the AOL unit, which had been growing at a 40 percent ad revenue growth clip for the last four quarters. Time Warner had been touting that it would continue to ourperform the broad U.S. Internet market for the year. They have now backed off those expectations. Internet ad revenue for AOL dropped to 16 percent for the quarter; while not bad, when investors were looking for a lot more, it makes it look miniscule. Expectations weren't managed well by the company.
Revenue for AOL decreased by 38 percent, finishing at $1.3 billion. In spite of that, operating income increased by 9 percent to $360 million.
For the New Line Cinema and Warner Bros. Studios, revenue declined by 5 percent to come in at $2.3 billion. With fairly strong performances from "300" and "Ocean's Eleven" this might have been somewhat disappointing, but the company said last years quarter had been unusally strong. But operating profit also plunged by 43 percent to come in at $81 million.
Their TV unit also fell by 1 percent, to finish at $2.6 million. In this area the company says the closing of the WB Network caused advertising to fall for the period, although income did increase by 4 percent to $634 million. With Turner Broadcasting and HBO included in the division, this still has to be considered disappointing.
Revenue for their Time Inc. publishing unit stayed about the same at $1.3 billion. The good news was digital sales and ad revenue were up a little, while operating income increased by 13 percent to $256 million.
The company added that it maintains its guidance for the year, with the expectations of earnings of $1.07 a share still in place for 2007. A lot of that will be connected to the expected success of the "Harry Potter" movie.
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