New Time Warner Chief Focuses on Consolidation
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Thursday, February 7, 2008
In the first five minutes of his first address as head of the world's largest media company yesterday, Time Warner chief executive Jeffrey L. Bewkes said:
- The company is looking to fold its New Line Cinema movie studio into the larger Warner Bros.
- AOL's declining Internet-access business will be split from its growing advertising business.
- Time Warner is working on an ownership change at Time Warner Cable, possibly completing the spinoff of the cable unit.
Then, Bewkes got on to the more prosaic news of discussing Time Warner's fourth-quarter and full-year 2007 earnings, released yesterday.
And then he took a breath.
HBO veteran Bewkes, 55, took over for Time Warner Chairman Richard D. Parsons, who stepped down as chief executive Jan. 1. Bewkes charged out of the gate yesterday, saying his remarks are "the start of a straightforward, ongoing dialogue," and adding that "I will tell you as much as I can."
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He takes over a $57 billion media and entertainment company, the result of a troubled merger with AOL in 2001 that resulted in company stock losing as much as 80 percent of its value. Time Warner shares have fallen 7 percent in the past year.
Bewkes addressed the stock slide right off the bat yesterday, saying he is working to "increase the value of the company and the stock price."
Wall Street responded favorably to Bewkes's remarks, pushing Time Warner stock up nearly 10 percent in midday trading before it closed up 31 cents, to $15.71, despite the report of a year-over-year drop in earnings.
For the fourth quarter of 2007, the company reported a profit of $1.03 billion (28 cents a share) on $12.64 billion in revenue, compared with a profit of $1.75 billion (44 cents) on $12.34 billion in revenue in the fourth quarter of 2006.
For all of 2007, Time Warner reported $4.39 billion in profit ($1.17) on $46.48 billion in revenue, compared with $6.55 billion in profit ($1.55) on $43.69 billion in revenue for all of 2006.
In addition to Time Warner Cable, AOL and the movie studios, Time Warner owns the 125 titles of its Time Inc. publishing arm, HBO and the cable networks of Turner Broadcasting System, such as CNN.
Bewkes confirmed yesterday what has been hinted at for months: Time Warner will split AOL into two pieces, which he labeled "access" and "audience," a process he said will take several months.
The access piece is AOL's dial-up business, which has been losing subscribers by the millions as they switch to high-speed Internet access. The audience piece includes AOL's extensive Web operations and its advertising business. AOL's ad revenue rose 18 percent last year, to $345 million.
Bewkes said Time Warner would run the two parts of AOL separately, but industry analysts think AOL's Internet-access business will be put up for sale after the split.
Photo Gallery
America Online
In April 2007, AOL President and Chief Operating Officer Ron Grant addressed the media in Bangalore, India. (FILE PHOTO) (Dibyangshu Sarkar/AFP/Getty Images)
AOL Chairman and CEO Randy Falco speaks during the Reuters Global Technology, Media and Telecoms Summit in New York on May 16, 2007. (FILE PHOTO) (Keith Bedford/Reuters)
AOL Chairman and CEO Jonathan Miller along with AOL Vice Chairman Ted Leonsis -- who is the majority owner of the Washington Capitals, Washington Mystics and minority owner of the Wizards -- met with The Washington Post to discuss AOL's new business model in 2006. (FILE PHOTO) (Leslie Walker/Washington Post)
An employee walks through one of the doors inside the lobby of AOL headquarters in November 2004. (FILE PHOTO) (Joe Raedle/Getty Images)
This 2006 photo shows the annual company volunteer day at AOL headquarters in Dulles. AOL employees packaged more than 2,000 bags for The Red Cross, Loudoun Family Services, Loudoun Literacy Council, and Emmaus Services for the Aging in D. C. (FILE PHOTO) (Tracy A. Woodward)
YouthAIDS Global Ambassador Ashley Judd spoke to more than 300 America Online employees at the company's headquarters in 2005 to promote HIV/AIDS education and prevention. (FILE PHOTO) (Tim Nguyen/AOL)
AOL and Advertising.com executives gather at AOL headquarters in 2004 to talk to the media. The companies announced that AOL had agreed to pay $435 million to acquire Advertising.com, a provider of interactive marketing services. In photo, left to right: Advertising.com CEO Scott Ferber; Advertising.com Chief Product Officer John Ferber; AOL Vice Chairman Ted Leonsis; AOL Chairman and CEO Jonathan Miller. (FILE PHOTO) (Rick Kozack for AOL)
The photo for this illustration was taken in New York in 2006. Here, a collection of compact disks containing promotional software for AOL's Internet service is shown. (FILE PHOTO) (Mark Lennihan/Associated Press)
In 2003, then-Virginia Gov. Mark Warner speaks during gathering at AOL headquarters in Dulles prior to the ceremonial signing of an anti-spam bill. Shown listening to Warner is, from left: AOL executive Ted Leonsis; president of the Northern Virginia Technology Council, Bobbie Kilberg; Virginia Attorney General Jerry Kilgore and Virginia State Rep. Jeannemarie Devolites. (FILE PHOTO) (Rich Lipski)
This 2002 photo shows the outside of AOL headquarters in Dulles. (FILE PHOTO) (Kenneth Lambert/Associated Press)
In this Dec. 11, 2001 photo, Robert Pittman, chief operating officer of AOL Time Warner, presents his keynote address to Internet World Fall 2001 at New York's Javits Convention Center. (FILE PHOTO) (Richard Drew/Associated Press)
This photo taken Feb. 29, 2000, shows AOL Chairman and CEO Stephen Case, left, and Time Warner Chairman and CEO Gerald Levin as they prepare to testify before the Senate Judiciary Committee in Washington, D.C. about the merger of AOL and Time Warner. (FILE PHOTO) (Mario Tama/AFP)
AOL CEO Gerald Levin is shown speaking before the House Commerce Telecommunications Subcommittee in Washington in this September 27, 2000 photo. (FILE PHOTO) (Brendan Mcdermid/Reuters)
In this 2000 photo, Steve Case, left, Chairman and CEO of America Online, hugs Gerald Levin, Chairman and CEO of Time Warner, following a press conference in New York during which the two companies announced that AOL would buy Time Warner for about $163 billion in stock. At the time, the merger was considered to be the biggest business deal in history. (FILE PHOTO) (Mike Segar/Reuters)
This 1999 photo shows James V. Kimsey, founding CEO and Chairman Emeritus of America Online. (FILE PHOTO) (Philip Bermingham Photography)
In this March 13, 1995 photo, Microsoft CEO Bill Gates, left, and America Online CEO Steve Case address the Microsoft Professional Conference for the Internet. (FILE PHOTO) (Lou Dematteis/Reuters)
Signs inside the lobby of AOL's Dulles headquarters are seen in this 2004 photo. (FILE PHOTO) (Joe Raedle/Getty Images)
The lobby inside AOL's headquarters is seen in Dulles. The firm, which is owned by media giant Time Warner, has seen its number of subscribers shrink in recent years amid fierce competition. (Joe Raedle/Getty Images)
Time Warner Cable became publicly traded last year, though only 16 percent of the company is open to general shareholders. Time Warner holds 84 percent of the industry's second-largest cable company.
Bewkes said yesterday that the boards of Time Warner and Time Warner Cable are negotiating to determine a "change in ownership" of Time Warner's interest in the cable company, a process that he said would conclude by the end of the first quarter.
Though Bewkes did not explicitly state that Time Warner would divest its cable asset, he did say that it has a "different business profile from our other businesses."
Bewkes comes from the content side of Time Warner and said the company will push ahead on offering video on demand, aimed at television sets, not just computers. He said the company would outpace its rivals in video on demand to demonstrate that it's a good value.
Bewkes added that Time Warner would undergo extensive cost-cutting, beginning with the corporate office, which will cut its annual expenses by $50 million a year.
Tagged: AOL
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