Time Warner Issues Earnings Warning

Monday, December 18th 2000, 12:00 am

By: News On 6

NEW YORK (AP) â€” Time Warner Inc. warned investors Monday that its full-year earnings would be lower than previously forecast due to weaker advertising revenues at its cable networks in the fourth quarter combined with a slowdown in music sales and disappointing box office results.

Time Warner, whose merger with America Online Inc. just cleared a major regulatory hurdle last week, said that its cash earnings would likely grow 11 percent for all of 2000 instead of the 12 percent to 13 percent previously forecast.

Investors didn't like what they heard. Time Warner shares plunged $9.63 or 13 percent to $63.09 in afternoon trading on the New York Stock Exchange. AOL shares, which move in tandem with Time Warner's, were off 14 percent, or $6.82, at $42.14, also on the NYSE.

Time Warner blamed general softness in the advertising market for the slowdown in ad revenues at its cable networks, which include CNN, TBS and TNT. It attributed the box office slowdown to poor results at the Adam Sandler film ``Little Nicky,'' which has opened to poor reviews.

Music sales have been ``weaker than anticipated'' in the fourth quarter, Time Warner said, but the company said its two other major operating divisions, publishing and cable systems, are still on track. In the same statement, AOL said it was likely to meet Wall Street expectations for revenues from advertising and commerce in the fourth quarter.

Separately, Time Warner also said it would take a higher ownership stake in Road Runner, a high-speed Internet service, as part of a restructuring of the venture.

AT&T Corp., Microsoft Corp., and Compaq Corp. are getting out of the joint venture, leaving Time Warner with most of the equity and Advance/Newhouse with a smaller stake. Time Warner officials wouldn't disclose the breakdown of the new ownership.

The Justice Department had required AT&T to sell its 25 percent interest in Road Runner as a condition of AT&T's purchase of MediaOne, which closed in June. AT&T also has a stake in ExciteAtHome, the main competitor to Road Runner in providing Internet service over cable TV lines.

The changes would end Road Runner's exclusivity on Time Warner's cable systems, allowing other Internet service providers to gain access to the systems more quickly, Time Warner said. Road Runner currently has about 1 million customers.

The restructuring will end up costing Time Warner a total of about $570 million, and the company expects to record a charge of $20 million to $40 million related to the deal in the fourth quarter. Road Runner also named Jeffrey King, a Time Warner Cable executive, as its new CEO Monday, replacing William Gordon.

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On the Net:

Time Warner site: http://www.timewarner.com