Updated to include earnings call audio and coverage: Time Warner more than doubled its buyback of shares and beat analysts estimates by two cents, with net income of $897 million, or 19 cents per share, compared to $499 million, or 11 cents per share, for 3Q04. More to come.
Update: AOL highlights: Predictably, subscription revenue dropped 10 percent to $1.6 billion from $1.8 billion in 3Q04. Advertising was up 28 percent, to $328 million from $257 million in3Q04. Combined with other income, AOL ended the quarter with revenues down 5 percent to $2.04 billion from $2.14 billion but operating income up 7 percent to $481 million from $450 million. Significantly, margin improved three points to 21 percent. For all the concern about dwindling subscribers, worth keeping in mind that AOL still has 20 million-plus members bringing in an average of $19.09 per sub.
For an understanding of why Chairman and CEO Dick Parsons doesn’t want to spin off TW Cable, the MSO produced $2.3 billion in revenues last quarter, up 13 percent with a margin of 39 percent. TWC sells HSD in nearly one fourth of service-ready homes and already has more than 850,000 digital phone subs.
Update: Parsons said cable is still considered a strategic asset. But, he said, one the current spin-off plans and other cable moves are complete, “we’ll then have the flexibility to further modify our ownership structure in the event that real opportyunities to increase shareholder value dictate doing so.”
– Parsons took the unusual step of updating listeners on the status of talks regarding AOL. (During the intro, we were told the company wouldn’t do so again until there was something definitive.) He said the company continues to believe AOL represents “one of our most siginificant opportunities for long-term value creation.” He said the company is working to accelerate the transition to a better mix of revenue streams with an emphasis on ad-supported and pointed out that AOL will be one of only four companies with internet ad revenue of $1 billion or more. “We’re going to maximize the growth and value creation of our audience platform … anchored by AOL.com” — something AOL can do on its own given its substantial sub/ad revenues. “It is true that we are engaged in a series of exploratory discussions involving AOL with a number of strategic partners, many of whom have been identified in the press coverage. The discussions cover a range of
potential commercial and other strategic relationships and transactions. … These discussions will result in a transaction only if we determine it can enhance our competitive profile and our prospects for increasing value.”
During q-and-a he reminded an analyst that Time Warner’s management and borard “tend to be more strategicallyoriented than fiancially oriented. We are trying to do things that are going to create value for the long term so you can always think of that as a prism through which to evaluate whatever we do.”
– Jeff Bewkes, chairman, Entertainment & Networks Group, said it’s too early to offer an specifics about traffic and stickiness at AOL.com. He said the music sites not only maintained their traffic behind the AOL wall when they added the ad-supported sites but traffic has increased dramatically outside. They’re starting to see a shift in the kinds of activities at Aol.com and an increase in visits during work hours.
You can download the audio here. (8.3 Megs, 48:15)
Earnings release (pdf) | Text | Outlook (pdf) | Webcast | Transcript (wsj.com sub. req.)
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