updated 11/1/2006 8:14:26 AM ET 2006-11-01T13:14:26

Time Warner Inc., the world’s largest media conglomerate, posted sharply higher third-quarter earnings on Wednesday due largely to several asset sales and adjustments related to its deal to acquire cable systems from Adelphia.

The company’s AOL unit, which is revamping its business model, posted higher profits as it slashed marketing expenses for its dial-up access service. But AOL’s revenues fell as lower revenues from dial-up subscribers outpaced gains in Internet advertising.

The New York-based company, which owns Time Inc., Warner Bros. and HBO, had net earnings of $2.3 billion, or 57 cents a share, versus $853 million, or 18 cents a share, in the year quarter last year.

Revenues rose 7 percent to $10.9 billion from $10.2 billion.

The latest results included 23 cents per share in discontinued operations related to cable systems that Time Warner has since transferred to Comcast Corp. as part of a three-way deal with Comcast to acquire the systems of Adelphia Communications Corp.

The figures also included 14 cents per share in gains from the sale of Warner Bros.’ Australian theme park business, other asset sales and one-time effects.

Without the discontinued operations or one-time gains, the earnings were equivalent to 19 cents per share, up from 17 cents per share on a comparable basis in the year-ago period.

Analysts polled by Thomson Financial had been expecting earnings of 20 cents per share.

On an operating basis — before interest expenses, taxes, depreciation and amortization — Time Warner’s income grew 16 percent to $2.9 billion, led by gains at its cable TV business and at AOL. The company’s cable networks and magazine publishing divisions also posted gains, while TV and movie programming declined.

The company’s shares fell 21 cents in pre-market trading to $19.80. The shares have been rising steadily since their $15.84 close on August 9, shortly after the company announced its new strategy for AOL. Longer term, the shares have been trading below $20 since May of 2002.

AOL posted a 21 percent gain in profits despite a 3 percent decline in revenues as the division cut back on marketing expenses for its dial-up Internet access business, which continued to dwindle rapidly.

AOL is in the midst of turning its business model away from charging for Internet access in favor of selling advertising online, a formula being followed successfully by Internet rivals Yahoo Inc. and Google Inc.

AOL lost another 2.5 million dial-up subscribers in the quarter, bringing its total to 15.2 million. Subscription revenues fell 13 percent to $210 million while advertising revenues jumped 46 percent, to $151 million.

This summer AOL said it would offer many of its services for free, including e-mail, as part of its business overhaul.

For the first nine months of the year, Time Warner earned $4.8 billion, or $1.13 per share, versus $1.4 billion, or 29 cents per share, in the comparable period last year. Nine-month revenues rose 2.8 percent to $31.8 billion.

The company also backed its previously announced full-year outlook of posting growth in operating income in the low double-digit percentage range, excluding the impact of the Adelphia transaction and other one-time effects.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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