Media Slowdown Catches Up With Time Warner (TWX)

The advertising recession caught up with Time Warner (TWX) in the first quarter. Revenues declined 7% from 2008 to $6.9 billion, due mainly to decreases at the AOL, Publishing and Filmed Entertainment segments, offset partially by an increase at the Networks segment.

The company’s net income fell slight to $690 million from $822 million. Cost cutting must be working.

Revenue from AOL and the firm’s Time, Inc publishing units were hit particularly hard.

Revenue at Time, Inc. went from $1.045 billion to to $806 million. Operating income at the unit had an extraordinary drop to $12 million from $145 million in the same period last year. At AOL, revenue fell from $1.128 billion to $867 million. Operating income dropped from $405 million to $265 million.

Revenue at network programming division rose about 5% to $2.8 billion and operating income was up slightly to $308 million. Film entertainment revenue fell slightly to to $2.6 billion and operating income was off was up a tick to $308 million.

The result show the CEO Jeff Bewkes, who has been in office for five quarters, was much too slow in disposing of AOL and the company’s magazine group. Each will probably struggle through the rest of the year, further undermining their values. Doing nothing about the two was a strategic mistake and the investors in the company will pay for it.

At least TWX affirmed its guidance for 2009. Cold comfort

Douglas A. McIntyre