Time Warner Lifts Buyback

Time Warner Inc., fending off pressure from financier Carl Icahn to take actions to boost its shares, said Wednesday that it allocated more than twice the amount it previously earmarked for a stock buyback program.

The disclosure that the New York media giant will repurchase $12.5 billion of its stock, instead of $5 billion, came as the company reported solid third-quarter earnings of $897 million, or 19 cents a share.

The amount exceeded Wall Street’s consensus of 17 cents as reported by Thomson Financial, and came largely from an improved performance by its cable systems and network division.

In a conference call with analysts, Chief Executive Richard Parsons said the new plan passed muster with big investors.

“We’ve spoken to a majority of our large shareholders and today, like many of them, we see buying our shares as the most compelling use of our capital,” Parsons said.

Unclear is whether Icahn will be mollified. He and his group, which own a 2.8% stake, have been agitating for the company to repurchase $20 billion of its shares, and to separate its cable business from the entertainment properties.

The company’s stock barely reacted, rising 33 cents to $17.90.

Time Warner’s profit was up 80% from the $499 million a year earlier, when income was depressed by the company’s move to set aside $500 million to cover a settlement with federal authorities investigating accounting irregularities at its America Online unit.

Revenue in the quarter rose 6% to $10.5 billion.

“The cloud over this company is definitively gone,” said Christopher Marangi, an analyst at Gabelli & Co, whose sister company owns about 275 million shares of Time Warner stock.

Income at Time Warner Cable rose 15% to $945 million. Growth was driven by 240,000 new digital-phone subscribers, for a total of 854,000, and 234,000 new Internet access customers, to 4.6 million.

“By adding phone service over the internet, the company is making it easier for customers to stay within the Time Warner offerings,” said Thomas Eagen, a media analyst with Oppenheimer & Co.

Profit at the company’s network group also grew, increasing 21% to $766 million, spurred by the syndication of “Sex and the City” from its HBO channel and higher advertising revenue.

Profit at Time Warner publishing, which includes Time magazine, rose to $288 million, up 9%. In a separate release Wednesday, the company confirmed that Time Inc. received a subpoena from the U.S. attorney’s office, as part of a widening probe into circulation-related practices.

But profit at the company’s film division slumped 30% to $253 million.

The company said the drop was caused by difficult comparisons to the year-earlier quarter, when it released the hit film “Harry Potter and the Prisoner of Azkaban.”

This week, Warner Bros. Entertainment cut as many as 300 workers, and is expected to trim an additional 100 soon in its international group. In the conference call, co-Chairman Jeff Bewkes, who manages the company’s studios, said the job reduction was part of an annual review of the unit’s expenses, adding that all Hollywood studios are under financial pressures.

Time Warner’s America Online unit continued to see its dial-up business erode, losing 678,000 subscribers in the third quarter. Advertising revenue helped boost profit by 7% to $481 million.

Parsons confirmed reports that the company was in discussions to sell a stake in AOL as part of a transition from a subscription-based business to an advertising-driven portal. Potential investors include Microsoft Corp., Comcast Corp., Yahoo Inc. and Google Inc.