Time Warner Lights Up Wall Street

AOL's European service gained 38,000 in the quarter, bringing its member base to 6.4 million.

"I feel positive about the progress AOL is demonstrating," Don Logan, chairman of Time Warner's Media & Communications Group, said on a conference call with analysts. The company added 600,000 subscribers to broadband service plans in the quarter, he said, partly through offers such as an unlimited dial-up service plan with broadband features.

Paid-search advertising revenue at AOL amounted to $74 million in the quarter, up 57% from one year earlier. Ad revenue, from both paid search and traditional advertising, will improve throughout the year, Logan said. "We're going to get our fair share of the advertising growth," he said.

Revenue at Time Warner's cable TV systems came in within expectations at $2.04 billion, while OIBDA of $750 million appeared to be slightly lower than analysts' forecasts; expenses for the quarter included a $27 million reserve related to a legal claim. The operator added 193,000 residential broadband Internet customers in the quarter, bringing the total to 3.4 million subscribers.

The company said the Securities and Exchange Commission and the Justice Department are continuing their investigations into the company's accounting and disclosure practices, including advertising sales practices at America Online. The company said that until accounting issues are resolved with the SEC, it's unlikely that the SEC will give the green light to any securities offerings, such as the potential initial public offering of Time Warner Cable.

Parsons suggested Time Warner was unlikely to spin off AOL any time soon, saying that the business has a lot of upside but is undervalued in the market.

On Wednesday, Time Warner shares slipped 34 cents to $16.48. In postclose action they rose 3%.