UBS Media Conference News

Bewkes: No 'Value-Destroying' Acquisitions for Time Warner

On Course to Become Pure 'Branded-Content Company'

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NEW YORK (AdAge.com) -- The scheduled split of Time Warner from its cable division is on track for "early 2009," but don't expect the company to spend any of the $9.5 billion in proceeds on acquisitions.

Jeff Bewkes
Jeff Bewkes Credit: AP
"Acquisitions have been the cause of much of the value destruction at media companies and certainly at Time Warner," said CEO Jeff Bewkes at UBS's Global Media and Communications Conference.

Rather, Mr. Bewkes said, expect the company to "buy a company we know very well, which is Time Warner," in the form of dividends and share buybacks as it completes its transition to a pure "branded-content company."

Revenue under pressure
Mr. Bewkes said revenue is under pressure in the fourth quarter due to the downturn in advertising, slowing DVD sales and the bankruptcy of Tribune Co., a major buyer of shows from Warner Bros. Television Group.

"In terms of the current market outlook, it has become more challenged," Mr. Bewkes said. "Visibility has gotten more difficult, but we have less exposure to advertising than some of our peers."

The company is still exploring alternatives for AOL, including a sale, spinoff or joint venture with a partner such as Yahoo, he said, and an outcome will have to be reached "fairly soon."

Mr. Bewkes indicated that a sticking point in strategic talks on AOL has been that the company isn't getting credit for any operational progress it has made as it gains audience through its new content initiatives.

'Disappointing' ad sales
"The operating performance of AOL in terms of audience and traffic is up. Ad sales are not up in the same way, and that has been disappointing to us," Mr. Bewkes said. "Consequently, I think, the value of AOL's operating achievements is being lost."

He said part of the challenge is AOL's status as the No. 3 in the portal marketplace, behind Yahoo and MSN, which gives it diminished leverage among advertisers. An acquisition or joint venture with Yahoo would solve the scale problem, but Mr. Bewkes said a spinoff of AOL's content businesses as a stand-alone internet company is also on the table.

"Is this valued as well as part of a larger media company or on its own as a smaller internet stock?" he asked rhetorically. "We don't have a religious view that we have to operate it."

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