AOL Drags Time Warner's Q1 Results
Revenue, AOIBDA Dip 7% At Media Giant
Mike Farrell -- Multichannel News, 4/29/2009 12:51:16 PM
Time Warner Inc.'s troubled AOL unit continued to be a drag on growth, pushing revenue and cash flow down 7% each in the first quarter.
Revenue at the media giant was $6.9 billion in the period, down from $7.2 billion last year. Adjusted operating income before depreciation and amortization (AOIBDA, a measure of cash flow) dipped to $1.6 billion from $1.7 billion in the prior year.
The cable networks segment continued to report strong results -- revenue was up 9% to $2.8 billion and AOIBDA rose 11% to $1.1 billion -- but it was not enough to offset losses at AOL and publishing.
At AOL, which has been rumored to be on the chopping block for months, the steady decline continued. Revenue at the once-mighty online company fell 23% to $867 million (including a 20% drop in advertising revenue) and AOIBDA plunged 37% to $255 million.
At the publishing unit, which includes Time Inc., revenue was down 23% and AOIBDA fell 92% amid an increasingly bleak print advertising environment.
"Our performance is in line with what we anticipated," Time Warner chairman and CEO Jeff Bewkes said on a conference call with analysts. "Advertising at AOL and Time Inc. is proving even tougher than we anticipated."
Speculation has been rampant that Time Warner would attempt to either spin off or sell the AOL unit. That speculation was fueled by recent moves: a recent debt solicitation that removed some restrictions of a sale or spin of the unit and the hiring of former Google executive Tim Armstrong to head up the unit. In its 10-Q quarterly filing Wednesday, Time Warner also stated that it has notified Google of its intention to purchase the Internet giant's 5% stake in AOL.
That purchase would depend on an independent assessment of the value of the stake and could take several months to complete. However, Bewkes said on the conference call that the company would announce AOL's ultimate fate "very soon."
It is also likely that Google would take a major haircut on the investment. Back in 2005 when it was first announced, the value of Google's AOL stake was pegged at $1 billion.
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