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High Anxiety at Time Warner

One shareholder who has had enough of Time Warner's weak growth is the newly activist-minded Carl Icahn. He and his hedge fund buddies have banded together to take a decent-size stake in Time Warner with the stated intention of forcing management to do something and get the stock restarted. Where Icahn and backers such as SAC Capital have advocated a complete cable unit spinoff and a $20 billion buyback, CEO Dick Parsons has counseled patience for management's more measured plan, which would give shareholders 16% of Time Warner Cable and a $5 billion repurchase.

The various to-dos have been both good news and bad in Time Warner's executive suites. On the one hand, the company now confronts a growing list of weighty decisions. On the other, says Noto, "News flow on Mr. Icahn's efforts as well as the various strategic alternatives for AOL are overshadowing TWX's sub-par growth."

As always, Time Warner's results will hinge largely on cable gains. Analysts expect Time Warner Cable will show solid numbers. Noto expects the unit to show 9.4% growth in earnings before interest, taxes, depreciation and amortization, reaching $902 million. He sees basic cable subs being flat, but he expects Time Warner to show strong growth in high-speed digital subs for the quarter. Noto projects 195,000 new-user additions there.

Filmed entertainment has weathered a tough box-office period relatively well, cashing in on three releases that met or exceeded expectations: Charlie and the Chocolate Factory, Batman Begins and Wedding Crashers. Each cleared the $200 million hurdle at the domestic box office. Though the division faces tough comps with last year, the scene is expected to improve in the fourth quarter, when the studio releases the latest Harry Potter installment. Warner Home Video says it has outperformed the industry, grabbing a 19.1% share of sales.

Time Warner Cable and General Electric's (GE) NBC Universal Cable inked a renewal deal for USA Network, and a carriage agreement for Universal HD, mun2, Telemundo Puerto Rico and video on demand. Time Warner Cable will also include NBC and NBCU programming as part of its Start Over service when launched later this year, allowing customers to restart shows in progress.

On Monday, Time Warner rose 25 cents to $18.

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