msnbc.com staff and news service reports
updated 4/29/2009 10:21:47 AM ET 2009-04-29T14:21:47

Time Warner Inc. said Wednesday it plans to spin off one or more of its struggling AOL businesses, which helped drag down its first-quarter profit by 14 percent.

The owner of Time magazine, Turner Broadcasting and HBO earned $661 million, or 55 cents per share, for the period ended March 31, down from the year-earlier result of $771 million, or 64 cents per share. The adjusted results were better than Wall Street expected.

Time Warner also maintained its full-year adjusted earnings forecast.

"Although the company’s Board of Directors has not made any decision, the company currently
anticipates that it would initiate a process to spin off one or more parts of the businesses of AOL to Time Warner’s stockholders, in one or a series of transactions," Time Warner said in a filing with the Securities and Exchange Commission.

It said it may also decide to pursue an alternative strategy, based on market conditions or if a better opportunity comes along.

Excluding investment losses and other items, earnings from continuing operations were 46 cents per share. That’s better than the 38 cents-per-share that analysts surveyed by Thomson Reuters predicted. Analysts’ estimates typically exclude one-time items.

Quarterly results reflect a 1-for-3 reverse stock split.

New York-based Time Warner, which spun off Time Warner Cable Inc. in March, says revenue dropped 7 percent to $6.95 billion from $7.47 billion. Aside from the pressures of its AOL and publishing units, the company said lower DVD sales at its filmed entertainment division also squeezed results.

Analysts expected revenue of $6.78 billion.

Time Warner sliced its net debt to $10.4 billion from $20.7 billion at the end of 2008, primarily because the spin-off of Time Warner Cable resulted in a one-time dividend payout of $9.25 billion to Time Warner.

The separation is expected to help the parent company concentrate on its strengths in content, especially if it can also shed all or part of AOL, acquired as part of AOL’s $106 billion purchase of Time Warner in 2001.

Time Warner still expects 2009 adjusted earnings to be about flat with a year ago, which comes out to $1.98 per share. The forecast accounts for the stock split as well as the Time Warner Cable spin-off.

Analysts forecast profit of $1.96 per share.

The Associated Press contributed to this report.

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