By Karen Jacobs
Time Warner Inc. is committed to turning around its AOL Internet
business even as the unit loses customers at a faster than expected
pace, the media conglomerate's chief executive said on Friday.
AOL's dial-up subscribers have been defecting to high-speed services
largely provided by cable and phone companies as it works to revamp
its business as an online provider of entertainment and other services
supported by advertising revenue.
"We are committed to completing the transformation of AOL," CEO
Richard Parsons told Reuters at the close of Time Warner's annual
shareholder meeting in Atlanta.
Some investors, including one who spoke at Friday's meeting, have
asked whether AOL might be spun off as its results weigh on overall
earnings at the world's largest media company.
AOL "is in a space that the marketplace thinks is contracting and
needs to migrate its business to another part of the Internet
landscape where the market is growing," Parsons said, referring to
efforts to move AOL from a subscription model to an advertising
supported operation.
"Our plans are to see that journey through," he said. "I think that if
we do that, the market and the stock will react very very positively."
AOL's future was one key point of contention between Time Warner
management and billionaire investor Carl Icahn, who challenged the
company to break up into four divisions. The two sides reached an
agreement in February after a bitter six-month battle over how to
boost Time Warner's share value.
Earlier this month, Time Warner reported quarterly results that
disappointed Wall Street forecasts, particularly the loss of 835,000
subscribers at AOL compared with a figure closer to 550,000 expected
by analysts. AOL accounted for about 20 percent of Time Warner's $10.5
billion in revenue.
Company executives expect to see better subscriber trends and
advertising at the unit in the second half of 2006.
Shortly afterward, AOL said it would cut 7 percent of its work force,
mostly from customer call centers. On Thursday, the Internet company
said it bought Lightningcast, which specializes in inserting ads into
online video, in a bid to expand its ad network.
Time Warner shares are nearly flat since the start of the year and
have underperformed the Standard & Poor's 500 Index by about 2 percent
in that time.
Parsons noted the weak sentiment afflicted most top media companies as
investors question how they will preserve growth amid an explosion of
competing media options, particularly from Internet leaders Google
Inc. and Yahoo .
But he said he believed continued growth in Time Warner businesses,
particularly its cable operations, and a $20 billion share buyback
will help eventually boost company stock.
Shareholders approved Time Warner's slate of 11 directors and bid
farewell to media mogul and CNN founder Ted Turner, who decided in
February to step down from the board.
Shareholders also approved a proposal not endorsed by the board to
accept a simple majority rule on shareholder votes wherever
possible. Parsons said the company would review its stance in light of
nearly 80 percent approval for the proposal.
Time Warner shares were unchanged at $17.40 in afternoon trading on
the New York Stock Exchange.
(Additional reporting by Michele Gershberg in New York)
Copyright 2006 Reuters Limited.
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Karen Jacobs (reuters@telecom-digest.org)