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Time Warner Shares Hammered (Update)

TSC Staff

Time Warner's (TWX Quote) shares were slumping Wednesday after the media giant said it will report a loss for 2008 owing to billions of dollars in charges.

In a press release issued before the start of trading, Time Warner said it expects to take a noncash impairment charge related to goodwill and intangible assets in the fourth quarter that will total roughly $25 billion before taxes. The charge stems from the company's cable, publishing and AOL segments.

Because of the charge, Time Warner is anticipating an operating loss for 2008, reversing the operating profit of $8.9 billion in the prior year. A net loss is also likely, the company said. Previously, it had been predicting earnings from continuing operations of $1.04 to $1.07 a share.

Time Warner Cable (TWC Quote), in which Time Warner owns more than an 80% stake, said its part of the impairment charge will amount to about $15 billion before tax. Additionally, Time Warner Cable will incur a pretax charge of approximately $350 million on its investment in Clearwire (CLWR Quote). Because of the charges, Time Warner Cable is also now forecasting a loss for the year.

Shares of Time Warner closed Wednesday's trading session down 6.3% to $10.29. Time Warner Cable closed down 4.8% at $21.56.

Two months ago, Time Warner projected that its full-year adjusted operating income, before depreciation and amortization, would grow around 5% from $12.9 billion in 2007. Now, the company believes the growth rate will probably be about 1%.

Several costs, estimated at $370 million to $380 million on a pretax basis, are now expected in the fourth quarter, and those will reduce the full year's financial results. In addition, the economic slowdown has been "somewhat more challenging" than the company previously planned for, particularly for the advertising businesses at the AOL and publishing divisions.

Time Warner still expects full-year free cash flow of around $5.5 billion. The company plans to report its fourth-quarter and full-year results on Feb. 4.

Time Warner wasn't the only big name to warn about its results and rattle the market Wednesday. Chipmaker Intel (INTC Quote) said the sluggish PC market would push its revenue below the levels expected by analysts, and its shares were losing 5%.