When the going gets tough the tough divest.
Example A of this strategy would be Time Warner, which could placate investor woes stemming from a weak first quarter, at least in part, by spinning off the rest of its cable division. The move has been widely anticipated after months of pressure from investors.
Time Warner (nyse: TWX - news - people )announced a double-digit decrease in its quarterly profits Wednesday, coupled with its widely anticipated decision to split from its cable division, Time Warner Cable (nyse: TWC - news - people ).
?We?ve decided that a complete structural separation of Time Warner Cable, under the right circumstances, is in the best interests of both companies? shareholders,? said Time Warner?s chief executive Jeffrey L. Bewkes.
Bewkes has already taken steps to restructure the media and entertainment company. New York City-based Time Warner, which also owns CNN, Warner Bros. and Time, had held discussions to merge its AOL unit with Yahoo! (nasdaq: YHOO - news - people ). (See ? Yahoo!'s Striptease?)
Time Warner?s cable unit became a separately traded public company just over a year ago, but Time Warner held on to 82.7% of Time Warner Cable?s 1.1 billion shares, according to Thomson Financial. The next largest shareholder is Adelphia Communications.
Bewkes?s ?statement provides some comfort to those expecting a separation,? said Christopher hahahahahahai, a portfolio manager at Gamco Investors, which owns Time Warner shares.
Time Warner did not specify how or when the cable spinoff would be completed but Bewkes expects the agreement ?to finalize soon.?
Now, investors will focus on AOL as another possible divestiture, hahahahahahai added.
AOL has struggled with losses of Internet access subscribers and is trying to remake itself into an online advertising business. In the quarter ended March 31, it saw a 25.3% decline in operating income to $405.0 million compared to the prior year's quarter.
Time Warner reported a profit decline of 35.8% to $771.0 million, or 21 cents per share, on sales of $11.4 billion, compared to profits of $1.2 billion, or 31 cents per share, on sales of $11.2 billion in the year-earlier quarter.
Time Warner Cable reported a profit decline of 12.3% to $242.0 million, or 25 cents per share, on sales of $4.2 billion, compared to profits of $276.0 million, or 28 cents per share, on sales of $3.9 billion last year.
Shares of Time Warner dropped 11 cents, or .7%, to $15.16 in late morning trading Wednesday, while shares of Time Warner Cable traded up 57 cents, or 2.1%, to $ 28.19.
http://www.forbes.com/markets/2008/0...markets18.html