The media giant, which is in the process of selling off its music operations, posted a net income of $638 million, or 14 cents per share, for the period that ended Dec. 31. That compares with a loss of $44.9 billion, or a loss of $10.04 per share, for the fourth quarter of 2002.
The earnings fell just short of market analysts' average estimate of 15 cents per share, as reported by Thomson First Call. Excluding write-downs related to asset sales, the media giant's net income would have reached 15 cents per share.
Time Warner reported fourth-quarter revenue of $10.9 billion, an increase of 6 percent over revenue of $10.25 billion for the same period last year. The growth was driven by gains across all the company's business units--except for.
Time Warner CEO Richard Parsons emphasized growth as the company's main priority for 2004, highlighting Time Warner Cable and its new Internet phone business in particular as its main driver. By the end of the first quarter, the division is expected toin six out of its 31 total systems across the country and will expand to nearly every market by the end of the year.
Time Warner Cable reported positive growth for the quarter in its residential, adding 182,000 new customers since the end of September.
"We expect every Time Warner segment to report higher growth in 2004 (before depreciation or amortization) than it did in 2003, except filmed entertainment," Parsons said during a conference call with analysts. Parsons earlier had warned that next year's film revenue will be hard-pressed to match the successful runs of "The Lord of the Rings" and "The Matrix" trilogies.
AOL overshadowed by cable
The company's struggling AOL division, whose name Time Warner during the quarter, recorded a 7 percent decline in revenue for the fourth quarter, amid continuing subscriber defections. AOL reported a U.S. subscriber base of 24.3 million at the end of 2003, indicating a loss of nearly 400,000 users during the fourth quarter and a reduction of roughly 2.2 million over the course of the year.
While narrowband continued to fall, the company's broadband subscribers grew by 400,000 to 3 million customers. AOL is aggressively marketing AOL for Broadband as a way to offset its dial-up losses, trying to convince people who use another broadband provider to pay an additional $14.95 a month to access AOL's online service. At the end of the year, AOL had about 2 million of these "bring your own access" subscribers.
Time Warner executives repeatedly asserted their expectations that AOL will grow, fueled mainly by reduced costs. They predicted that some revenue-generating businesses will also contribute to its growth, such as commercial search revenue from its agreement with Web search engine Google as well as an increase in AOL Europe subscribers. The Google deal in particular will"There will be an increase of advertising revenue next year," Wayne Pace, chief financial officer of Time Warner, said during the conference call. "This will largely be driven by search." , a huge feat, considering AOL's 40 percent decline in advertising in 2003.
Despite ongoing uncertainty at AOL, there is reason for Time Warner to stick with the business. Last year, Time Warner amassed $3.3 billion of free cash flow, which it will invest internally to grow businesses and possibly acquire outside companies. AOL contributed $1 billion to Time Warner's free cash flow.
For the full year, Time Warner had revenue of $39.6 billion, a 6 percent gain over its 2002 sales, and a net profit of $2.6 billion, the company's first annual profit since it merged with AOL in 2001.
The company said operating income is expected to grow in the high single to low double digits from $8.8 billion last year. The company reaffirmed that it expects operating income growth in the low double digits at AOL, compared with $1.5 billion in 2003.