Time Warner Will Double Share Buybacks; Cable Sales Rise by 80%

Time Warner, the world’s largest publishing and broadcast company, said third-quarter profit jumped 80% on rising sales at its cable-television unit. The company will more than double share buybacks to $12.5 billion.The chief executive, Richard Parsons, increased the stock-repurchase plan from $5 billion after billionaire investor Carl Icahn pressured the company to bolster its share price. Mr. Parsons said yesterday on a conference call that other large shareholders told him acquiring stock was the best use of the company’s cash.Time Warner’s profit beat analysts’ estimates, driven by a 15% jump in earnings at the New York-based company’s cable unit, which added 149,000 digital-TV subscribers. Profit also rose at the America Online Internet service and cable channels including HBO and CNN. Mr. Icahn is seeking a spinoff of the cable systems to lift the shares, which through Tuesday have fallen 8% this year.“They are being responsive to what Icahn is suggesting without taking it all the way,” said James Goss, an analyst with Barrington Research Associates in Chicago, who rates the stock “outperform.”“It’s a reasonable mid-point compromise.”Time Warner, which also owns the Warner Bros. film studio, reported third-quarter net income of $897 million, or 19 cents a share, compared with $499 million, or 11 cents, a year earlier, when the company had costs of $500 million to settle accounting probes.Sales gained 6% to $10.5 billion, the company said.Profit beat the average estimate of 17 cents from 24 analysts polled by Thomson Financial.Shares of Time Warner rose 33 cents to $17.90 at 4:18 p.m. in New York Stock Exchange composite trading. Class B shares of New York-based Viacom rose 18 cents to $31.73 yesterday after the company yesterday reported profit rose 1.8% to $735 million on higher sales at its cable-TV channels and film studio.Sales at Time Warner Cable, the no. 2 American cable provider behind Comcast with 10.9 million subscribers, rose 13% to $2.4 billion. Profit of $945 million beat the $915 million average estimate of five analysts surveyed by Bloomberg News.Time Warner Cable added 240,000 digital-phone subscribers during the quarter, raising the total to 854,000, and signed up 234,000 fast Internet access customers for a total of 4.6 million.The digital-phone customer number fell short of estimates by a Merrill Lynch & Company analyst, Jessica Reif Cohen, who expected 250,000 new subscribers. The Internet-access gain was higher than her forecast of 195,000.Time Warner plans to trade off 16 percent of the cable business to the public next year after it completes the acquisition of systems from Adelphia Communications. Mr. Parsons said yesterday on a conference call that Time Warner may sell a larger stake later.Mr. Parsons, who is 57, said yesterday he has spoken with most of Time Warner’s large shareholders, who told him buying shares is “the most compelling use of our capital.”Mr. Icahn, 69, didn’t immediately return a call and e-mail seeking comment.Standard & Poor’s Ratings Services yesterday placed the company’s debt, rated “BBB+,” three levels above noninvestment grade, on negative credit watch. The ratings agency said the buyback and the threat of more pressure from shareholders to repurchase stock prompted the credit watch.Time Warner is also in “serious discussions” with a number of potential partners on selling a stake in AOL, Mr. Parsons said, declining to name them.The company held discussions with Redmond, Wash.-based Microsoft and with Google, a person familiar with the situation said last month. Comcast, based in Philadelphia, is also in discussions with Time Warner to join Mountain View, Calif.-based Google in a common bid for a stake in AOL, people familiar with the talks said.

Time Warner Will Double Share Buybacks; Cable Sales Rise by 80%

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