Time Warner’s Parsons: Time for Growth


Time Warner Inc. posted mixed results in the fourth quarter -- revenue was up 6% to $10.9 billion, but cash flow (operating income before depreciation and amortization) declined 2%, just missing most analysts’ estimates.

Most analysts had predicted low-single-digit cash-flow growth in the period.

On a conference call with analysts, chairman and CEO Richard Parsons said the results were in line with his expectations, adding that Time Warner has successfully transitioned from what was a "reset year" (2003) to one where sustainable growth will be the mantra.

He added that with Time Warner’s debt-reduction plan completed about one year early -- the company’s net debt will be $20.1 billion after it receives $2.6 billion from the sale of its Warner Music Group in the first quarter -- the media giant will be able to focus on growth both internally and externally.

While external growth usually means acquisitions, Parsons said Time Warner will be cautious in any outside purchases.

"Our strategy and vision is using our capital in high-growth, high-return opportunities," Parsons said. "We’re now in a position to look outside our company for promising investments, but when we evaluate our alternatives, we’ll employ the same focus and same discipline we used in our debt-reduction program, and we will be patient."

He also pointed to internal uses of that capital, adding that Time Warner Cable’s accelerated rollout of voice over Internet protocol is a prime example.

VoIP will be a key driver in enabling the MSO to build on its existing cable base, to sell new products and to stem any customer losses to satellite competition, Parsons added.

For the quarter, basic subscribers were down slightly -- about 9,000 customers -- to end the year at 10.919 million. Time Warner Cable added 136,000 digital-cable customers and 182,000 high-speed-data subscribers in the period, slightly below analysts’ estimates.

New-services growth was strong: The MSO finished the year with 360,000 digital-video-recorder customers and 950,000 subscription-video-on-demand subscribers.

At the cable systems, revenue increased 9% and cash flow was up 8%, excluding impairment charges.

At the company’s networks division -- which includes its cable and broadcast networks -- revenue rose 4% and cash flow fell 9%, largely due to increased programming costs.

Time Warner stock fell 85 cents each to $17.96 per share Wednesday.