Music Sales, Cable Costs Widen Time Warner Loss

Time Warner Inc. said its first-quarter loss widened on sluggish music sales and higher costs resulting from several large cable acquisitions.

The media and entertainment company had a loss from operations of $93 million, or 32 cents a share, exceeding the 28-cent loss forecast by 10 analysts surveyed by Zacks Investment Research. A year earlier, it had a loss of $47 million, or 13 cents.

Sales and cash flow fell at its music operation, the largest in the U.S., amid fierce price-cutting by retailers. Still, Time Warner’s stock rose on higher cash flow at most of its other businesses and a plan to buy back as many as 15 million shares.

“Music is a problem for them, as it is for everyone else,” said analyst Dennis McAlpine at Josephthal, Lyons & Ross. “Cable was very strong, filmed entertainment was so-so and HBO continues to increase.”

Time Warner’s shares closed up 25 cents to $39.25. Revenue rose 17% to $4.56 billion from $3.89 billion, including Time Warner Entertainment, which holds the film, broadcasting and Home Box Office businesses.

New York-based Time Warner’s earnings continue to be overshadowed by other events, including its proposed acquisition of the 82% of Turner Broadcasting System Inc. it doesn’t own. US West Inc., owner of 25% of Time Warner Entertainment, has sued to block that purchase.

“The key to the stock in the near term continues to be the resolution of the lawsuit with US West. That doesn’t look like it’s going to happen any time soon,” McAlpine said.

Time Warner’s cash flow, measured as earnings before interest, taxes, depreciation and amortization, rose 32% to $899 million from $681 million.

Many analysts regard cash flow as a better measure of the company’s health than net income because it excludes the costs of carrying debt and provides a better picture of the operating businesses.