AOL Slowdown Nicks Time Warner

Time Warner (TWX) beat Wall Street's expectations for its second-quarter results, but the media conglomerate's shares slipped Wednesday as its closely watched AOL unit posted a slowdown in online advertising.

The company reported net income of $1.07 billion, or 28 cents a share, up from $1.01 billion, or 24 cents a share, in the same quarter last year. Analysts expected earnings of 21 cents a share, according to Thomson Financial.

Time Warner boosted its EPS with share buybacks, and it announced a new plan to repurchase up to $5 billion worth of stock. But that wasn't enough to steer attention away from a miss on the top line.

The company's revenue increased 6% in the second quarter to $10.98 billion, falling short of Wall Street's forecast of $11.13 billion. That helped send shares down 76 cents, or 4%, to $18.50 in recent trading.

Like its so-called old-media counterparts, Time Warner gets rewarded on Wall Street nowadays for showing investors that it has digital potential. The company's recent effort to shift its AOL unit from a subscription-based business to a pure advertising model sparked a long-awaited rally in the stock last year that has been justified by some impressive Internet growth.

That growth slowed dramatically, however, in the second quarter, accounting for the company's less-than-expected revenue. Its AOL unit said its ad sales in the period rose 16%, down from the 40% rate it logged for the last four quarters.