Time Warner Inc. (NYSE: TWX) sharesholders are growing increasingly impatient after the company announced yet another sharp drop in second quarter earnings. Net income at the media company fell 22 cents per share, while sales rose 5.2 percent to top analyst estimates.
AOL housed the majority of the problems this quarter. The internet service provider lost 604,000 web access subscribers while ad sales rose just 2 percent to $530 million. AOL shifted its focus on ad sales as the dialup ISP market began to shrink. Unfortunately, the move came just as online advertising peaked and now growth is hard to come by in the industry. Luckily, the unit's third-party ad network and revenue partnership with Google offset much of the losses.
AOL's publishing group also came up short this quarter. Time Inc. reported a 9 percent drop in advertising revenue as print advertising moves towards the online markets. In fact, the only bright spot in the quarter was the cable teleivion and film businesses that managed to drive growth in the quarter. All of this has investors wondering just when the company will be broken up so that true value can be unlocked.
CEO Jeff Bewkes recently announced his plans to get rid of Time Warner Cable and focus on TV and film instead. The executive merged the Warner Brothers and New Line studios to lower costs and said he was open to selling AOL back in May. Since then, parties like Microsoft have expressed interest, but there have been no late-stage conversations. The ability to sell off the cable division stake along with a sale of AOL should generate enough cash to satisfy shareholders.
Time Warner shares dropped sharply lower at open before recovering for a small profit.
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