Time Warner CEO Jeff Bewkes said the media giant will evaluate uses for the $9.25 billion in cash it stands to reap from the separation of its Time Warner Cable business, but that the windfall won’t necessarily be spent on acquisitions.
Speaking at the Sanford Bernstein Strategic Decisions Conference in New York Friday, Bewkes said the new Time Warner will be strictly focused on returns on investment after the split, which is expected by the end of the fourth quarter. And he added that any use of the cash from the TWC deal will be measured against returning cash to shareholders.
Bewkes didn’t elaborate on how that cash would be returned—either through share buybacks, dividends or other means.
But Bewkes is aware that investors worry how big media conglomerates use their capital, adding that historically the industry hasn’t had a very good track record.
“In our own history we’ve had enough failings in that regard that we are pretty intent on overcoming concerns investors would have about it,” Bewkes said. “Our stock is undervalued. …You all know mathematically what the benefits are of returning capital to shareholders. It is highly unlikely that it would make sense or be wise for us to divert any particularly large amount into some use that would be better than that.”
Time Warner has been named in several published reports as one of the bidders for The Weather Channel and it has been speculated that they could have NBC Universal in their sights. Bewkes didn’t address those acquisitions specifically, although he alluded to NBC when asked about Time Warner’s need to buy a broadcast network. He seemed to dismiss that possibility.
“We don’t need to do anything,” Bewkes said. “There has been speculation that the obvious one [broadcast network] may get carved off, but that comes with a lot of other economics—[TV] stations, all of those questions. Those are some big risk questions to assess.”
Bewkes said that Time Warner will continue to invest in its core content businesses, and praised the assets it will retain once the split is completed.
On the cable side, Bewkes said that Time Warner is well positioned with several highly rated cable networks—including two general interest networks TNT and TBS—and its premium service Home Box Office.
Bewkes said that although HBO failed to report double-digit growth in 2007—the first time in 15 years—that was expected because of “lumpiness” in the availability of some syndicated programming like The Sopranos and several long-term movie deals that had “clicked in” during that year.
“The HBO earnings juggernaut will continue pretty much on the track that it has been on over the long haul,” Bewkes said.