Time Warner Takes Its Time

Sometimes it's hard to see the forest for the trees when it comes to Time Warner (NYSE:TWX). It's easy to remember when AOL was a Rule Breaker and also difficult to forget the fact that AOL has been plaguing Time Warner in recent history. However, according to the company's recent earnings conference call, 2004 was the year that Time Warner "settled down." Maybe it has, in more ways than one.

Indeed, 2004 was a year in which AOL subscriber losses continued to prove painful, but on the other hand, an upsurge in advertising revenues helped assuage some of the pain. Subscriber losses have dropped to 22.2 million (that's 2 million lost subscribers over the course of the last year).

AOL's struggles with a changing Internet landscape have long been a high-profile story. Nevertheless, Time Warner continues to be a media company that offers all manner of important content that more than likely enters most of our homes one way or another. Although a slew of hot Time Warner movies hit the wide screen during the fourth quarter (including The Aviator and Million Dollar Baby), the company said that these releases were late in the quarter and so didn't have a meaningful impact on 2004. Meanwhile, last year's fourth quarter made for some difficult comparisons, most notably with Lord of the Rings: The Return of the King.

And, of course, Time Warner is the name behind important cable properties such as HBO, TNT, and TBS. Unless you've been living under a rock, you know that HBO has become a definite benchmark for popular programming over recent years.

When it comes to the struggling AOL line, the company said in its conference call that its strategy going forward with AOL is to increase audience and usage across its properties. Given some of its Web properties (which include Moviefone, Mapquest, Time, People, and Fortune), it's got some world-class content. The company plans a version of AOL for all Internet consumers, which it said will likely launch in mid-2005.

In the fourth quarter, Time Warner nearly doubled its net income to $1.13 billion, or $0.24 per share. Operating income increased 7% to $1.6 billion. Sales squeaked out a 1.9% increase to $11.1 billion. Although the company had a slightly down view for 2005, there are other interesting initiatives in the works, such as a bid for Adelphia with Comcast (NASDAQ:CMCSA) and its launch of digital telephone service through its cable operations.

It's easy to take shots at Time Warner because of the ongoing struggles at its AOL unit; granted, that's an interesting story to follow, as AOL finds its way back from some of the wrong turns it has made over the years. However, there is always the grand scheme of things, which paints a picture of a company that owns or distributes lots of the content that entertains or enlightens us. Time Warner does not yet seem poised to deliver any heated growth. However, for many long-term investors, the year that Time Warner settled down might not sound like such a bad year after all.

Alyce Lomax does not own shares of any of the companies mentioned, although she's looking forward to several of Time Warner's releases this year, such as "Charlie and the Chocolate Factory," which features her all-time favorite actor, Johnny Depp.