Time Warner Explores AOL-Stake Sale


Appearing to bow to pressure from activist investor Carl Icahn, Time Warner Inc. said Wednesday that it would more than double its planned share-repurchase program to $12.5 billion and, for the first time, the company admitted that it has been in discussions with other parties regarding possibly selling a stake in its America Online Inc. Internet business.

Time Warner had initially planned to buy back about $5 billion of its shares over a period of two years. But in August, Icahn revealed that he had teamed up with three other institutional investors to acquire a 2.6% stake in Time Warner, demanding that the share-buyback program be increased to $20 billion and that it divest its cable operations.

In October, Icahn turned up the heat, criticizing Time Warner management for several miscues and revealing that his group would seek one or more board seats at Time Warner’s next annual shareholder meeting in the spring.

In conjunction with its third-quarter earnings release, Time Warner chairman and CEO Richard Parsons said the board of directors and management determined that the buyback program could be expanded “while still having the resources to invest meaningfully in future growth, as well as to pay our regular quarterly cash dividend.”

Later on the call, Parsons addressed press reports during the past several weeks that Time Warner was in discussions with several parties -- including Microsoft Corp. and a partnership between Google Inc. and Comcast Corp. -- to buy an interest in AOL’s portal business.

While not specifically naming any of the companies, Parsons admitted that AOL has been in “a series of exploratory discussions” with other parties, many of which had been named in press reports.

“The discussions cover a range of potential commercial and other strategic relationships and transactions,” Parsons said, adding that talks are fluid and that Time Warner would only enter into a transaction if it would enhance AOL’s competitive position.

He added that Time Warner was continuing with its plans to accelerate the transition of AOL’s business model from one based on subscription revenue to one more driven by advertising.

Time Warner grew revenue in the quarter by about 6%, with operating income before depreciation and amortization rising 9%. Fueling that growth was strong performance by its cable systems and networks.

Time Warner Cable reported a 14% increase in revenue and a 15% rise in OIBDA in the period. The unit added 18,000 basic subscribers during the period, as well as 149,000 digital customers, 234,000 high-speed-data customers and 240,000 telephone customers.

At the company’s networks -- including Turner Broadcasting System Inc., Home Box Office Inc. and The WB Television Network -- revenue was up 10% to $2.4 billion and OIBDA increased 21% to $766 million.