Time Warner Gives Wall Street a Pleasant Surprise, but Has Bad News for Time Inc. Employees
Yesterday, Viacom told Wall Street that its third quarter had been better than most analysts expected. Today Time Warner (TWX) delivered a similar report. Jeff Bewkes and company reported Q3 revenue of $7.12 billion, which was more or less on track with the consensus estimate of $7.08 billion. But cost savings improved the bottom line: After adjusting for one-time charges, Time Warner earned 61 cents per share, much better than the 53 cents Wall Street had been looking for.
That won’t help employees at Time Warner’s Time Inc. publishing unit: The company confirmed that it will make big cuts this quarter and spend up to $100 million on restructuring charges. This is different from the $100 million in cuts that had been previously reported, but it will still mean hundreds of layoffs at the publisher.
Time Warner also boosted its guidance for the remainder of the year and confirmed once again that it wants to spin off AOL before the end of the year. As well it should: The company said it has already spent a staggering $24 million on the spinoff so far this year, which includes $9 million in “pretax direct transaction costs (e.g., legal and professional fees).” It has spent another $83 million in restructuring charges at that unit in 2009.
As usual, Time Warner said ad sales have been lousy, but that its cable networks and film divisions had done okay. The breakdown:
- Cable networks: Revenue up five percent, because subscriber fees were up nine percent. Ad revenue was down one percent.
- Warner Bros. movie studio: Revenue down four percent, because of slumping DVD sales.
- Time Inc.: Revenue down 18 percent; advertising down 22 percent. Adjusted operating income down 42 percent. Hence the coming cuts.
- AOL: Revenue down 23 percent. Subscription revenue, which will continue to shrink, was down another 29 percent, and ad revenue, which is supposed to improve one day, was down 18 percent.