Sales Light at Time Warner

Adjusted earnings match estimates despite falling AOL revenue.
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Updated from 6:39 a.m. EDT

Time Warner

(TWX)

reported adjusted first-quarter earnings Wednesday that matched estimates, although falling revenue at AOL and its movie studios left the top line slightly soft.

The media company, which fended off an assault by activist investor Carl Icahn in part by agreeing to a $20 billion stock buyback, said it has spent $8 billion of that sum already, and believes it will have spent $15 billion by the end of 2006.

Time Warner earned $1.46 billion, or 32 cents a share, in the quarter, up 59% from $915 million, or 20 cents a share, a year ago. Adjusted for discontinued operations, an accounting change and other special items, the company earned 20 cents a share in the latest period, matching the Thomson First Call estimate.

Sales rose 1% from a year ago to $10.46 billion, missing the consensus forecast of $10.89 billion. Among segments, revenue fell 7% to $2 billion at AOL, rose 15% at Time Warner Cable to $2.6 billion, fell 8% at filmed entertainment to $2.8 billion, rose 3% at networks to $2.4 billion and was unchanged in publishing at $1.1 billion.

In early premarket trading, the stock lost 14 cents, or 0.8%, to $17.28.

AOL's revenue decrease reflected a 13% drop in subscription revenue, partially offset by a 26% improvement in advertising. Time Warner said AOL's sales were hurt by a decline in domestic AOL subscribers and unfavorable currency translation.

In filmed entertainment, which comprises Warner Bros. and New Line Cinema, revenue was hurt by decreases in Warner Bros. worldwide theatrical revenue, lower television revenue and declines in home video revenue. The year-ago quarter included a handful of blockbuster movies, including "Ocean's Twelve" and "Million Dollar Baby."

Time Warner Cable's results reflected a 16% jump in subscription revenue that was related to a 24% rise in high-speed data sales and "significant growth" in digital phone results. Time Warner Cable had 11 million basic video subscribers at the end of the quarter, up a net 82,000 -- the highest quarterly subscriber gain in six years.

At some point during the next two months, Time Warner is expected to close a deal to buy bankrupt cable operator Adelphia, in a joint transaction with

Comcast

(CMCSK)

. Soon after that, the company intends to spin off some 20% of the distribution unit. The deal needs the approval of a bankruptcy court handling the Adelphia case, and must clear regulatory hurdles.

Within cable, digital video subscribers rose 241,000 from the previous quarter to 5.6 million, while residential high-speed data subscribers rose by 346,000 to 5.2 million. Digital phone subscribers rose by 270,000 to 1.4 million.

Time Warner investors are also awaiting news on the status of an apparent transaction being negotiated with John Malone's

Liberty Media

(L) - Get Report

that would see Liberty acquire the Atlanta Braves baseball team, and perhaps other assets, in exchange for Time Warner shares it holds. Time Warner has said that it is also looking to divest itself of other non-core assets.