This was originally posted at ZDNet's Between the Lines.
Time Warner's first quarter was weighed down by its AOL unit, which saw revenue fall 23 percent. Time Warner CEO Jeff Bewkes reiterated that the company is looking for "the right ownership structure for AOL."
Here's why: AOL reported first-quarter revenue of $867 million, down 23 percent from a year ago. Subscription (dial-up) revenue fell 27 percent, and advertising sales declined 20 percent. Both declines were expected, and AOL noted that ad sales were weak in all categories (ad networks, display, and search).
Operating income for AOL fell 47 percent to $150 million, which included restructuring costs of $58 million. AOL also ended the quarter with 106 million average U.S. unique users. AOL's dial-up business had 6.3 million subscribers, down 2.4 million from a year ago and 570,000 from the fourth quarter.
Time Warner has been trying to unload AOL and reportedly may attempt a spin-off. AOL recently named former Google exec Tim Armstrong as its CEO to right the ship. There are options: Time Warner could spin off AOL or sell its dial-up business to an outfit like EarthLink.
Simply put, AOL and Time Warner's publishing unit, which had an operating loss of $32 million, are dead weights on the company's overall earnings. Time Warner reported first-quarter net income of $661 million, or 55 cents a share, compared to $771 million, or 64 cents a share, a year ago.
Adjusting for investment gains and charges, Time Warner reported earnings of 45 cents a share on revenue of $6.9 billion, down 7 percent. The media giant had a bevy of moving parts--1 for 3 reverse stock split and Time Warner Cable dividend. Wall Street was expecting earnings of 38 cents a share.
Time Warner also reaffirmed its 2009 outlook of flat adjusted earnings of $1.98 a share relative to 2008.