No. 1 Media Company? Time Warner (For the Moment)

But With Cable Spinoff, Giant Will Drop Second to Comcast

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Ad Age has ranked Time Warner as the nation's largest media company every year since 1995. The giant will drop to No. 2 with the early 2009 spinoff of Time Warner Cable, a publicly traded cable-system operator currently 84% owned by its parent.

With Time Warner's cable spinoff, cable operator Comcast Corp. is set to be the No. 1 U.S. media company.

Time Warner Cable, meanwhile, will become a top 10 player on Ad Age's Media 100.

Time Warner CEO Jeff Bewkes says the spinoff will allow his company to focus on its core business of branded content.

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Time Warner still has to resolve what to do with one ongoing issue, AOL; possibilities include a deal with Google, Microsoft Corp. or Yahoo.

Time Warner shares in November 2008 hit a 10-year low of $7, down 93% from the all-time high of $95.81 in December 1999. (The company, known back then as America Online, used its inflated stock to buy the old Time Warner in the dot-com bubble, creating AOL Time Warner, later truncated to just Time Warner.)

What to do about depressed stock prices? Time Warner figured out a way to make its share price double or even triple. It may execute a one-for-two or one-for-three reverse stock split after completing the Time Warner Cable spinoff, a trick that would create a higher share price.

Time Warner explained in a late 2008 proxy statement: "The proposal to authorize a reverse stock split is based on the company's expectation that, following the [cable spinoff] ... the market price and trading ranges for the Time Warner common stock may be significantly lower than the current market price and trading ranges due to the fact that the company will have distributed all of its shares in Time Warner Cable to the company's stockholders."

Time Warner said a reverse split, resulting in fewer outstanding shares, "is likely to increase the market price and improve the marketability and liquidity of the Time Warner common stock."

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