Time Warner deals with AOL fallout

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aol_timewarner_medium.jpgReuters — Time Warner forecasts profit in 2009 to be flat compared to the previous year as it grapples with weakening advertising sales that caused its fourth quarter results to fall below Wall Street expectations.

The media conglomerate, whose shares fell 3.4 percent in premarket trading today, said advertising revenue dropped at its AOL Internet unit and Time Inc magazine publishing business in the fourth quarter. Revenue at its Warner Bros. film studios fell slightly.

Time Warner forecast 2009 income, excluding special items, to be flat with last year’s 66 cents a share. It said the estimate excludes Time Warner Cable, which will be completely split off in the current quarter, but includes around $250 million in previously announced restructuring charges related to AOL and Warner Bros.

Collins Stewart analyst Thomas Eagan said the outlook was below his forecast describing it as “conservative because there’s not much visibility in the market.”

Time Warner’s results come a day after rival media conglomerate Walt Disney Co reported a sharply lower-than-expected quarterly profit, hurt by TV advertising, DVD sales and theme parks, sending its shares down 7 percent.

Time Warner posted a fourth-quarter net loss of $16 billion, or $4.47 a share, including writedowns, versus a profit of $1.02 billion, or 28 cents a share, a year earlier.

Excluding one-time items, profit was 23 cents a share, below the average analyst expectations of 26 cents, according to Reuters Estimates.

Revenue fell 3 percent to $12.3 billion, below the $12.6 billion expected by Wall Street.

Declines in advertising revenue at AOL and Time Inc were partly offset by strong performances at its cable networks, such as CNN and HBO, which posted revenue increases in both affiliate fees and advertising.

The company’s majority owned cable service provider, Time Warner Cable, also reported an 8 percent rise in revenue growth as it added more phone and broadband customers. But the unit lost around 119,000 basic video subscribers.

Time Warner said last month it would take a $25 billion charge related to the depressed value of Time Warner Cable assets and other impairment charges.

Warner Bros., producer of movies like “The Dark Knight,” said earlier this month that it would cut 800 jobs, while AOL plans to cut about 700 jobs.

Time Warner shares fell to $9.45 in premarket trading from their previous close of $9.78 on the New York Stock Exchange. The stock has lost about 44 percent of its value since hitting a year-high in September 2008 of 16.90.

Reuters GroupReporting by Yinka Adegoke and Tiffany Wu

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