Jeffrey Bewkes, the chief executive of Time Warner Inc., announced plans on Wednesday to downsize what has for years been the world's largest media company by separating the cable-systems unit from the film and television businesses.
The announcement was made as Time Warner reported first-quarter net income fell 36 percent to $771 million, or 21 cents a share, from $1.2 billion, or 31 cents, a year earlier. Sales rose 2.1 percent to $11.4 billion.
Revenue grew 2 percent to $11.4 billion. According to Thomson Financial, analysts expected the company to earn 23 cents a share on $11.4 billion in revenue.
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.
The company's shares was down 18 cents or 1.18 percent to $15.09 in morning trading on the
New York Stock Exchange.
AOL lost 647,000 Internet-access subscribers during the quarter, making the total user base 8.7 million at the end of March to. The business has lost more than half of its customers in the past two years.
Revenue at the unit declined 23 percent to $1.1 billion, and operating profit totaled $284 million. AOL relocated to New York this month in a bid to attract more Madison Avenue advertisers and is integrating purchases of online ad companies.
AOL's sales of display ads fell 18 percent in the first quarter from a year ago, and are again expected to decline in the current quarter.
Time Warner's other business units performed better. Its cable networks business, which includes HBO, CNN, TNT and TBS, reported revenue growth of 10 percent to $2.7 billion.
The company's film business, which consists of Warner Brothers move studio, had a 4 percent in revenue to $2.8 billion. The film division reported declines in profit, however, to $183 million, from $243 million in the year-ago period, reflecting a $116 million restructuring charge following the reorganizing within New Line Cinema.
Bewkes said the company is cutting 450 job cuts at New Line Cinema and also fired 100 headquarters employees.
Earnings at the publishing unit that includes Time Magazine, Sports Illustrated, People, Time and Fortune more than doubled to $93 million on a 73 percent jump in revenue to $145 million. The units operating income, before depreciation and amortization, rose 73 percent to $145 million.
The gain was attributed to the closure of Life magazine in 2006, as well as lower restructuring charges in this year's first quarter.
Bewkes, who forecasts earnings growth of as much as 9 percent this year, is also in the process of splitting off the declining AOL Internet-access division from the unit's ad business.