Time Warner to cash in on movie

Time Warner Inc, the world's largest media company, may say second-quarter sales increased on box-office gains from Sex and the City, new phone customers and higher advertising sales at its cable-television networks.

Sales may have gained 4 percent to $11.4 billion, the average of 12 analysts' estimates compiled by Bloomberg. Net income probably declined 22 percent to $827.8 million, or 23 cents a share, from a year earlier, when discontinued operations boosted results, according to the estimates.

The AOL Internet unit, which is separating the shrinking Internet-access division from its advertising business, and falling revenue at Time Inc probably held back growth in the period, said Michael Morris, a UBS AG analyst in New York. Time Warner Cable Inc, the second-largest US cable-television provider, and the TV networks division that houses TBS and CNN may have increased sales faster than the overall company.

Kristin Davis, Sarah Jessica Parker and Cynthia Nixon in Sex and the City: The Movie. AP "The true value of Time Warner lies in its film and television studios and its cable networks," Morris said in an interview. "AOL is in several businesses that are either facing pressure from the weaker advertising environment or pressure from increased competition, or both."

AOL may stop New York-based Time Warner, also the owner of the Warner Bros film studio and Time magazine, from meeting its full-year target of a 7 percent to 9 percent gain in operating profit, Morris said.

Film revenue probably gained 3.5 percent to $2.33 billion in the quarter, according to Anthony DiClemente, an analyst at Lehman Brothers Holdings Inc. in New York.

As of July 31, Sex and the City, the movie adaptation of the HBO series about four New York women, had taken in $372.8 million in worldwide ticket sales since its May 30 release, according to researcher Box Office Mojo LLC, in Burbank, California.

Cable networks including TBS probably increased revenue by 7 percent to $2.78 billion, DiClemente wrote in a July 7 note. He rates Time Warner "equal weight", meaning it should perform in line with the industry over the next year.

Second-quarter sales at the cable-TV systems unit likely rose 7.2 percent to $4.3 billion, DiClemente said. Time Warner Cable as well as industry leader Comcast Corp have been taking phone customers from AT&T Inc and Verizon Communications Inc as they package the service with video and Web access.

Time Warner is scheduled to report earnings today. Spokesman Keith Cocozza declined to comment ahead of the results.

Time Warner has dropped 13 percent this year in New York Stock Exchange composite trading, compared with a 15 percent decline for the Standard & Poor's 500 Index. The shares rose 17 cents to $14.40 on Monday.

Chief Executive Officer Jeffrey Bewkes, who took over in January, is in the process of spinning off Time Warner Cable Inc and merging the Warner Bros and New Line studios. The 56-year-old CEO said in May that he is open to selling AOL.

AOL bought Time Warner for $124 billion in a 2001 takeover that sparked shareholder lawsuits and $100 billion in writedowns. The shares have slid almost 70 percent since the transaction.