Time Warner posts higher profit, boosts buyback

NEW YORK (Reuters) - Time Warner Inc on Wednesday reported a bigger-than-expected 80 percent jump in quarterly profit, beating analysts' expectations, as high-speed internet and digital phone services drew more subscribers and online advertising sales increased.

The world's largest media company, whose shares rose 1.3 percent, also said it more than doubled its stock buyback commitment to US$12.5 billion from US$5 billion.

The buyback, which will occur over a 21-month period, comes in response to concerns by billionaire activist Carl Icahn about the company's laggard stock price.

"More than doubling the stock buyback will be encouraging to investors," said Fulcrum Global Partners analyst Richard Greenfield.

Icahn and a coalition of hedge funds collectively own a 2.8 percent stake in Time Warner. The corporate raider has pushed the company to completely spin off its cable company and raise its stock buyback to US$20 billion.

Time Warner said third-quarter earnings rose to US$897 million, or 19 US cents per share, from US$499 million, or 11 US cents per share, a year earlier.

The New York-based owner of HBO, the Warner Brothers movies studio and Time magazine beat analysts' expectations of 17 US cents per share, according to Reuters Estimates.

"The Street should like these results," said Oppenheimer & Co analyst Thomas Eagan, pointing to Time Warner's 8.5 percent rise in cash flow, compared with his projections of about 2.5 percent.

Revenue rose 6 percent to US$10.5 billion.

Although revenue at AOL fell 5 percent, primarily from a drop in dial-up subscribers, online advertising revenue rose 28 percent, factoring in its Advertising.com purchase last year. AOL lost 678,000 subscribers in the quarter, ending the period with 20.1 million.

Cable revenue rose 13 percent, boosted by a 24 percent increase in high-speed internet subscriber revenue. Average revenue per basic cable subscriber rose 13 percent to US$86. The cable division added 18,000 basic subscribers, ending the quarter with 10.9 million.

"Charlie and the Chocolate Factory" and "Batman Begins" helped drive film studio revenue up 6 percent.

The company affirmed its full year 2005 financial expectations of adjusted operating income before depreciation and amortization rising in the high-single digit percentage range.

Also on Wednesday, Time Warner's cable division was one of four large US cable operators to announce plans for a 20-year, wireless phone service joint venture with Sprint Nextel as they face off against telephone companies entering the video market.

Time Warner is also in the process of courting Microsoft, Google and Comcast Corp to sell off a minority stake in its AOL division.

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