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All Eyes on Time Warner, AOL as Profits Fall

AOL's to-do list
With profits down 36 percent, media conglomerate Time Warner (NYSE: TWX) affirmed its widely anticipated plans to spin off its cable unit -- even though the group's performance helped buoy the rest of the company.

Time Warner, whose media holdings include Time magazine, HBO, Warner Bros. and AOL, reported net income of $771 million, or 21 cents per share, well off from the $1.2 billion or 31 cents a share reported in the same quarter last year.

Wall Street had expected earnings of 23 cents per share on $11.39 billion in revenue, according to Thomson Reuters.

Ironically, it was Time Warner Cable that propelled the company to a 2 percent lift in revenue over the same period the previous year, banking $11.4 billion, just slightly ahead of consensus.

The cable division, which includes the company's broadband ISP business, made up for the losses posted by the filmed entertainment unit and AOL, whose Q1 revenue was $1.13 billion, down from $1.46 billion in the year-earlier period.

Nevertheless, CEO Jeffrey Bewkes has been under pressure to jettison Time Warner's 84 percent stake in the cable unit and initiate a stock buyback.

"We've decided that a complete structural separation of Time Warner Cable, under the right circumstances, is in the best interests of both companies' shareholders," Bewkes said in a statement. "We're working hard on an agreement with Time Warner Cable, which we expect to finalize soon."

At $1.9 billion, Time Warner's 1Q operating income was down 23 percent from the same period last year, when the company enjoyed a lift from the sale of AOL's ISP business in Germany.

Time Warner shares were down 15 cents in early trading.

All eyes on AOL

During Time Warner's earnings call this morning, Bewkes also reaffirmed his turnaround strategy for the company's closely watched AOL unit, following continued declining revenues for the group.

In the first quarter, AOL's subscription revenues were down 38 percent, offset in part by a modest 1 percent increase in advertising revenues. AOL counted 8.7 million dial-up subscribers as of March 31, down 647,000 from the previous quarter and 3.8 million from the year-earlier period.

Bewkes had previously announced plans to separate AOL's waning dial-up business from its ad-supported media properties to convert the Internet pioneer into a fully advertising-based media and content Web portal.

During this morning's call, he said financial arrangements needed to enact that split would be in place by the end of the second quarter.

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