Nat Worden
For the full year, the company reiterated its previous target of low double-digit growth in operating income, excluding the impact of the Adelphia transaction and other one-time items.
AOL, its Internet business, posted a 21% gain in profits even while revenue dropped 3% as it slashed marketing spending for its shrinking dial-up service business. AOL, which joined Time Warner as part of an ill-fated merger at the height of the stock bubble in the late 1990's, is directing its business model away from subscriptions to online advertising, an approach that has paid off for rivals like Google (GOOG Quote - Cramer on GOOG - Stock Picks), Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks) and Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks). This summer, AOL plans to offer services, like email, for free. At Time Warner Cable, revenue rose 44% from a year ago to $3.2 billion, reflecting the Adelphia deal. Operating income rose 17% from a year ago to $550 million. Last month, the company filed for an initial public offering of 16% of Time Warner Cable stock, with proceeds from the sale going to Adelphia creditors. The increase of 33,000 basic video subscribers in the historical Time Warner Cable systems represents a 50% increase compared to the increases in the prior-year quarter, as well as in the second quarter of 2006. In the acquired systems, basic video subscribers declined by 30,000 during the quarter. Digital video subscribers were 7 million at the end of the quarter, representing an increase of 143,000 subscribers in the historical systems and a decline of 7,000 in the acquired systems. Residential high-speed data subscribers rose by 214,000 in Time Warner Cable's historical systems. This represents the fifth consecutive quarter in which net subscriber additions surpassed 200,000. Total residential high-speed data subscribers at the end of the quarter were 6.4 million. Elsewhere, the company's network division posted a 4% rise in revenue to $2.5 billion, reflecting higher subscription and advertising revenue.
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