Time Warner Soft on Revenue

Time Warner (TWX Quote - Cramer on TWX - Stock Picks) matched second-quarter earnings targets but came up light on revenue. The media giant also said it would make software and email free at its struggling AOL unit in a bid to reignite growth in its online advertising business.

For the second quarter ended June 30, Time Warner made $865 million, or 20 cents a share, from continuing operations. That reverses the year-ago continuing operations loss of $425 million, or 9 cents a share, and beats the Thomson Financial analyst consensus estimate by a penny.

But revenue rose just 1% from a year ago to $10.7 billion, missing the $10.99 billion Wall Street estimate.

Adjusted operating income before depreciation and amortization climbed 7% to $2.7 billion, reflecting double-digit increases at the cable and filmed entertainment segments as well as a gain at the networks segment. This growth was offset partly by declines at the publishing and AOL segments.

At AOL, revenue declined 2% to $2 billion, due to an 11% decrease in subscription revenue, offset in part by a 40% increase in advertising revenue. Adjusted operating income before depreciation and amortization decreased 4% to $505 million, as lower subscription revenue and higher traffic acquisition costs were offset partly by higher advertising revenue and a reduction in marketing and network costs.

During the second quarter, AOL had 113 million average monthly domestic unique visitors and nearly 52 billion domestic page views, according to comScore Media Metrix, which translates into 153 average monthly page views per unique visitor. At June 30 the AOL service totaled 17.7 million U.S. members, a decline of 976,000 from the prior quarter and 3.1 million from the year-ago quarter. In Europe, the AOL service had 5.6 million members, a decrease of 218,000 from the previous quarter and a decline of 571,000 from last year's quarter.

In cable, revenue rose 15% to $2.7 billion, reflecting primarily an increase of 16% in subscription revenue. Subscription revenue benefited from a 23% increase in high-speed data revenue, significant growth in digital phone revenue, a 21% rise in enhanced digital video services revenue and higher current year basic cable rates and subscriber levels. Average monthly subscription revenue per basic cable subscriber rose 14% to approximately $91, marking 22 consecutive quarters of double-digit, year-over-year growth.

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