Technology News: Internet: Time Warner Q1 Profit Beats Street

Time Warner Q1 Profit Beats Street

By Tim Gray
E-Commerce Times
Part of the ECT News Network
05/02/07 2:35 PM PT

Surging advertising sales on AOL and strong subscriber growth in its cable, Internet and phone businesses pushed Time Warner to profit growth in the first quarter that exceeded analyst forecasts. The media giant reported earnings of $1.2 billion. Last summer, AOL began offering its services for free to attract more users as well as more online ad dollars.

Time Warner (NYSE: TWX) has reported first-quarter profits that outperformed Wall Street expectations, mostly on the strength of its rise in new cable, Internet and phone subscribers, as well as strong online ad sales .

Shares of the world's largest media company rose more than 3 percent as it reported a 40 percent increase in AOL advertising.

Although earnings fell to US$1.2 billion, or 31 cents per share, from $1.5 billion, or 32 cents per share, a year earlier, those numbers included a gain of 6 cents per share from a string of asset and investment sales.

The New York-based company reported sales of $11.2 billion -- in line with analysts' forecasts and up 9 percent from a year earlier.

Ad growth at AOL this year is likely to be at or above U.S. industry rates, but probably below 40 percent, according to Time Warner.

Internet Ad Sales Hot

The company's strategy of building its share of the fast-growing Internet advertising market while letting income from subscriptions rise has been successful, said Bruce McGregor, senior analyst with Current Analysis.

"The results benefited from double-digit percentage profit increases at the AOL and cable services divisions," McGregor told the E-Commerce Times. "They are still building the services out."

The cable business was the main driver of the higher revenues, up 61 percent.

Weaker Divisions

As expected, strength in Time Warner's cable operations was offset by weakness in its film division, where revenue fell 1 percent to $2.7 billion.

Time Warner's movie studios, including Warner Brothers, faced tough competition last year. Movie division revenue failed to beat year-earlier sales boosted by "Harry Potter" and "Wedding Crashers" DVDs.

Other divisions were also flat, according to Time Warner. The company's publishing unit revenue fell 1 percent, and operating income declined 49 percent because of higher restructuring costs.

Giving It Away

Last summer, AOL began offering its services for free to attract eyeballs as well as online ad dollars.

So far, says McGregor, the strategy seems to be paying off.

Next Article in Internet

Digg Users Revolt Against 'Censorship'
May 02, 2007

Users who railed against the removal of information posted on the popular social networking site Digg may have won a round, as the company has given up on trying to control the angry mob. It's far from clear, though, who will emerge victorious when the dust settles. Digg may find itself in legal trouble that could force the entire operation to shut down.

More by Tim Gray

Blockbuster Lowers Subscriptions Rates
June 13, 2007

Blockbuster will now offer a new plan allowing customers to place online orders to rent three movies at a time for $16.99, a dollar less than its previous top-tiered offering, called Total Access. The movies are mailed to the customer. Blockbuster is losing money on the online business but says it will be profitable next year as orders rise.

Toshiba Slashes HD DVD Sales Targets
June 12, 2007

Toshiba now expects to sell 44 percent fewer HD DVD players than forecast this year. The slump comes at a critical time for the company, as the market still has not shown which high definition disc player format will dominate. Blu-ray Disc technology, rival of the HD DVD format, already has a foothold in 170 major companies.

Jobs: We Also Make Computers
June 12, 2007

Apple provided at its annual developer conference a peek at some of the 300 new features of "Leopard," the company's latest operating system, which is slated for October release. The computer maker will also make its Safari Web browser available for users of Microsoft's Windows operating system.

[Search More...]