• by Wayne Friedman , May 4, 2006

While Time Warner pulled an impressive overall company net profit gain of 59 percent, its cable networks grabbed lower-than-expected ad revenue results.

TW's WB Network pulled in with 10 percent lower revenues than the previous first-quarter results, while Turner Cable Networks only pulled in a paltry 6 percent improvement over the previous period. Media analysts were expecting much more from the cable network group.

Time Warner's cash flow growth for its cable networks group (earnings before interest, taxes, depreciation, and amortization--EBITDA) were 8 percent. Here, too, some media analysts were expecting a bit more. Jessica Reif Cohen, media analyst at Merrill Lynch, was estimating about 9 percent.

Dick Parsons, CEO of Time Warner, said the company was in negotiations to buy the 50 percent of Court TV it doesn't own from Liberty Media. In addition, Time Warner said that it and Liberty Media were in discussions to 'swap' certain assets.

Overall, the company said net income was nearly $1.46 billion, or 32 cents a share--compared with a year-earlier profit of $915 million, or 19 cents a share.

Quarterly revenue reached $10.46 billion. This was a smidge under analysts' expectations. Analysts polled by Thomson First Call had, on average, expected the world's largest media company to post a profit of 20 cents a share on revenue of about $10.9 billion.

Much of the good news came from a better-than-expected performance from Time Warner Cable.

TW Cable tallied a 17 percent EBITDA, with revenue rising 15 percent to $2.58 billion on greater demand for digital video, digital video recorder, digital telephone, and subscription video-on-demand services. Parsons told analysts the cable results prove that the "triple play" package of selling digital video, high-speed Internet, and telephone service is working.

The bad news continued for AOL--as revenue declined 7 percent in the first quarter. While this was expected by analysts, the cash flow problems at AOL really stood out. Some analysts were expected a drop of 13 percent versus a quarter ago. The results were that AOL fell hard, 17 percent drop in EBITDA versus a year ago. Subscription revenue dropped 13 percent--but advertising sales at AOL grew 26 percent.