Time Warner Spins Off Cable, 1Q Revs Rise

headshotTime Warner announced mixed financial results for its first quarter, as well as its long-awaited announcement that it would be splitting off its cable operations division.

Time Warner net income dropped 36% to $771 million, while revenues rose 2.1% to $11.42 billion from $11.18 billion.

Financial numbers for Time Warner Cable proved the decision to split away from the parent company is a good one. Operating income for Time Warner Cable was up 10% to $636 million, up from $579 million in last year's first quarter. Revenue rose 8% to $4.2 billion. Although CEO Jeff Bewkes made the announcement of the Time Warner Cable spinoff, he was short on specifics, saying details would be released soon.

As opposed to other major cable operators, Time Warner was able to make gains from its endemic cable business--adding 55,000 new basic-cable subscribers in the period--all of which surprised Wall Street analysts. Estimates were that Time Warner would be hit with a loss of 32,000 basic subscribers.

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Recently, other cable operators have been hurt by phone companies, such as Verizon and AT&T, and new video retail programming businesses.

Other unexpected news: Time Warner Cable had a net gain of 304,000 Internet customers. The group also witnessed 4% growth in local cable advertising revenues to $197 million.

However, Time Warner's AOL unit continues to have its problems. Revenues decreased 23% to $1.1 billion, from fewer AOL brand subscribers. Operating income at the unit decreased 74% to $284 million.

Major gains for Time Warner occurred with its TV networks segment, which includes Turner Broadcasting System and HBO. Revenue climbed 10% to $2.7 billion. Operating income only improved 2% to $874 million, due in large part to increased programming costs coming from NBA games on TNT.

Looking forward, Bewkes said second-quarter advertising sales at the Turner cable networks--including CNN, TBS Superstation, TNT and other channels--are up by a double-digit percentage over the same period a year ago.

As part of its earnings call with investors, the company also released data that showed CNN--for the first time in six years--ranked first among cable news networks in key demos: adults 18-49 and adults 25-54.

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