Time Warner Inc. said Wednesday it will spin off the rest of its cable TV business, a widely anticipated move after months of pressure from investors.
The news came as the company, which also owns Warner Bros., CNN, AOL and Time magazine, reported a 36 percent decline in first-quarter earnings from a year ago, when it had a gain from the sale of AOL’s Internet access business in Germany. The results were mainly in line with expectations.
Time Warner’s cable unit became a separately traded public company just over a year ago, but the company held on to an 84 percent stake.
Time Warner Cable is the second-largest cable TV operator in the country after Comcast Corp. and is the largest operating unit of Time Warner, the world’s largest media conglomerate.
Time Warner’s CEO Jeff Bewkes had promised a decision on the cable business this month when he made his first earnings report to investors in February.
The company didn’t offer specific details on how or when the spin-off would be completed, but Bewkes said in a statement that Time Warner was working closely with the board of Time Warner Cable and expected a final agreement soon.
Investors have long pressed Time Warner to simplify its sprawling corporate structure, and a spin-off of Time Warner Cable was high on their wish list.
Time Warner provided no update, however, on another major investor concern, the future of AOL. That unit has been struggling with losses of Internet access subscribers and is trying to remake itself into an online advertising business.
AOL reported more weak quarterly results that included a 25 percent decline in profit. Revenues fell 23 percent, as diminishing subscription fees more than outweighed a 1 percent gain in online advertising.
Wall Street has also pressed Time Warner to decide what to do with AOL, and in February Bewkes announced that AOL would begin to separate its faltering Internet access business from its growing advertising operation, which could presage a sale of one or both units.
AOL’s ultimate fate has been complicated further by Microsoft Corp.’s unsolicited offer to buy Internet pioneer Yahoo Inc.
A combination of Microsoft and Yahoo would remove two likely suitors for AOL, and AOL has also been contemplating some kind of combination with Yahoo.
Time Warner earned $771 million or 21 cents per share in the first three months of the year, down from $1.2 billion or 31 cents per share a year ago.
Revenues rose 2 percent to $11.42 billion from $11.18 billion.
Excluding the year-ago profit from the sale of AOL’s German business and other gains and losses, earnings per share were 22 cents, or 24 cents after adding back restructuring charges at New Line Cinema, which was folded into Warner Bros.
Analysts polled by Thomson Financial had predicted earnings of 23 cents per share.
Time Warner’s cable TV profits rose 7 percent on an 8 percent gain in revenues, and the company surprised analysts by adding 55,000 basic video subscribers, even though many had predicted losses.
Investors watch that number closely to see how cable companies are faring against competition from satellite TV providers as well as new cable-like video services being offered by phone companies.
In movies and TV production, profits fell 16 percent despite a 4 percent gain in revenues due to the $116 million in restructuring charges incurred as New Line Cinema was folded into Warner Bros. Without the charges, profits rose 19 percent.
Profits from cable networks, a division that includes HBO, CNN and TBS, edged up just 2 percent despite a 10 percent gain in revenues.
Programming expenses there jumped 23 percent on higher costs for sports broadcasts, especially in professional basketball, and higher costs for developing original shows at HBO.