Time Warner Reports 21% Gain in Profit

The moneymaking wizardry of “Harry Potter and the Goblet of Fire” helped boost Time Warner Inc.’s fourth-quarter profit 21% to $1.4 billion.

But the results Wednesday weren’t enough to cast a spell over dissident investor Carl Icahn, who disparaged the results as inadequate and continued to call for the media giant’s breakup.

Buttressed by successes in film and cable TV, the profit amounted to 29 cents a share, beating analysts’ estimates. A year earlier, the company earned $1.1 billion, or 24 cents a share. Revenue rose 7% to $11.9 billion.

“If I can be allowed one moment of immodesty, no one can run these businesses better than the current management is running them,” Chief Executive Richard Parsons said to analysts in a not-so-subtle jab at Icahn, who wants to fire him.

In a speech in New York, Icahn shot back, saying, “They should be doing better.” He said the company was worth $25 a share; on Wednesday its stock closed at $18.22, up 69 cents.

“If you just broke it up, the stock would be higher,” Icahn said. “In Time Warner, we’re saying the conglomerate concept does not work.”

Icahn has spearheaded a group of investors pushing to restructure Time Warner, although they control only about 3% of the company’s stock. His demands include a spinoff of Time Warner’s cable division. This week, he recruited Frank Biondi Jr., a former chief executive of Viacom Inc. and Universal Studios, to help lead his campaign.

Time Warner spokeswoman Susan Duffy dismissed Icahn’s remarks as “random comments.”

“We had a great quarter and a strong year,” Duffy said. “This is a management team that is building shareholder value and getting results.”

Analysts said the year-end results showed disciplined management by the New York-based company, which owns such name brands as Warner Bros., Time magazine, Home Box Office and CNN.

“I think this supports Dick Parsons because he has his costs under control,” said Laura Martin, a senior analyst at research firm Soleil Media Metrics. “All of the divisions came in in line except for AOL, which lagged more than expected, but that was offset by the film division.”

Part of Parson’s belt-tightening efforts in the fourth quarter included layoffs at Warner Bros., where about 5% of the workforce was let go in November.

The company’s cutbacks didn’t end in the fourth quarter; its Time Inc. magazine unit announced job cuts this week.

Time Warner benefited last quarter not only from cost cutting but also from $800 million in global ticket sales for the “Harry Potter” film, which was released in November. The company’s filmed entertainment division, which includes New Line Cinema as well as Warner Bros., saw operating earnings jump 53% to $307 million.

Operating profit for Time Warner’s network group, which includes HBO and CNN, rose 23% to $741 million. The cable group reported profit growth of 12%, to $555 million. Publishing earnings rose 15% to $392 million, while AOL’s profit was up 45% to $174 million.

“AOL continues to be the key value swing factor,” said Richard Greenfield, a media analyst at brokerage Pali Capital Inc.

Although the company’s earnings had lived up to expectations, he said, the question remained whether the stock price could go much beyond the $17 level where it has long hovered.

For all of 2005, Time Warner’s profit rose 18% to $2.91 billion, or 62 cents a share. Revenue was $43.7 billion, up 4%.

Reuters was used in compiling this report.