Time Warner Bullish on Online Ads

Time Warner saw its second-quarter earnings slip, but not as
badly as some industry watchers had expected.

The media and Internet giant also bumped up 2004 financial forecasts, in
part because of improving prospects for online advertising on its America
Online properties.

For the quarter, Time Warner earned $777 million, or 17 cents per share,
down 26 percent from $1.06 billion, or 23 cents per share, compared to the
same period last year. Last year’s numbers spiked because of the legal settlement
with Microsoft . Analysts had expected earnings per
share for the most recent quarter to be 15 cents.

Revenues were $10.9 billion, up 10 percent, led by its movie studios (Warner
Bros.), TV networks (CNN, TBS) and cable company (Time Warner Cable).

“I feel pretty good about the operations of this company,” CEO Dick Parsons
said in a conference call with analysts.

Despite AOL’s losing more than 668,000 subscribers during the quarter,
Parsons is still bullish on the Internet service and content provider, which
saw revenue inch up 2 percent in the second quarter.

AOL still has about 23 million subscribers in the United States. The
gradually declining dial-up business will continue to be profitable for
several years, Parsons said.

Advertising is the reason for the CEO’s optimism. In the second quarter, ad
revenue climbed by $42 million, a 23 percent gain over the same period last year. The
lion’s share of the increase came from paid search fees.

AOL expects continued gains in online ads because of its pending acquisition
of Advertising.com, which the company believes will help it extend to other sites
on the Web, as well as a generally improving market.

On the cable side, Time Warner saw gains in high-speed data revenues,
digital video services (including personal video recorder services) and ad

Time Warner Cable added 127,000 net residential high-speed data subscribers
in the quarter for a total of 3.5 million subscribers, almost 20 percent of
homes that are eligible to receive the service.

Parsons said the company likes the cable business and would like to expand
its footprint. However, it gave no indication that an acquisition is in the
works. Analysts have speculated that Time Warner could purchase the assets
of bankrupt Adelphia.

At midday, shares of Time Warner were down 31 cents,
or 2 percent, to $16.60.

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