Clock Ticks at Time Warner

Disappointment remains Wall Street's watchword on Time Warner (TWX).

The media behemoth overcame a challenge by restive shareholders earlier this year and is preparing to roll out a new plan for its torpid AOL unit. But as Time Warner prepares to post second-quarter earnings Wednesday morning, its stagnant share price continues to flummox investors.

The New York media company, which owns cable systems, TV networks and movie studios, along with publishing and online properties, has seen its shares fall 7% in 2006. That lags behind the big-cap S&P 500, which is up 2%, and trails hard-charging peers Disney (DIS) and News Corp.(NWS), each up more than 20%.

What is so frustrating to supporters of management led by CEO Dick Parsons is that except for AOL, all the company's other units routinely perform well. This quarter, analysts are betting that once again most divisions, with the possible exception of AOL, will pull their weight.

For example, Gabelli & Co. fund manager Larry Haverty says that the company's cable division is twice as important as AOL in the overall mix. Haverty expects "very strong results for cable," saying Time Warner Cable's triple-play bundle is more evolved than Comcast's (CMCSA). Gabelli & Co. owns Time Warner shares.

On the movie and television front, Haverty says Warner Bros. has gone through a bit of a "soft patch," but adds that he, like others, has confidence in the studio and the TV networks.

Still, it's AOL and losing dial-up customer cash flow that weighs on the minds of most. Haverty explains that while the dial-up service yields significant cash flow, it has also proved expensive to market and operate. As such, if the company can impress upon Wall Street that too much cash flow will not be surrendered in an AOL makeover and that ad growth is keeping pace with online competitors, investor nerves may be calmed.