AOL Time Warner considers sale of assets to repair debt

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The world's biggest media company is thinking smaller. AOL Time Warner CEO Richard Parsons, looking to slash debt, says "non-core, non-strategic" assets could go on the block. But the question is whether that will generate enough cash-or whether AOL Time Warner may be pressed to unload some bigger ventures from music to online to even magazines.

AOL Time Warner wants to cut its debt from $26 billion to about $20 billion by year-end 2004. The company already is prepping a stock offering for cable systems and may sell its book business.

Mr. Parsons has made debt a priority as AOL Time Warner struggles to fix America Online-and as the company warned last week of weaker performance in two other operations, cable systems and music.

The media conglomerate posted a record-breaking net loss of $98.7 billion in 2002, including a loss of $44.9 billion in the fourth quarter, due to charges to earnings to reflect the company's decline in value. AOL Time Warner had booked a $54 billion charge in the first quarter to reflect a decline in value of Time Warner assets since the merger of America Online and Time Warner in January 2001. It shocked Wall Street with another $45.5 billion charge in the fourth quarter to reflect a decline in value of America Online ($33.5 billion), cable ($10.5 billion) and music ($1.5 billion).

Revenues were up 7% for the year, to $41.1 billion, thanks mainly to strong growth at the film division.

AOL Time Warner also disclosed another executive departure: Vice Chairman Ted Turner, biggest individual shareholder with a 3.1% stake.

Mr. Parsons said 2003 will be "a reset year."

Chief Financial Officer Wayne Pace said the company expects to grow 2003 revenues in the mid-single-digit percentages and earnings before interest, taxes, depreciation and amortization will remain essentially flat. AOL revenues will remain flat, with advertising/commerce revenues down 40% to 50%. The first quarter will likely mark the low point for the year, where declines in AOL advertising revenue will more than offset improved performances by the filmed-entertainment and network units, said Mr. Pace.

The stock fell 17.4% to end the week at $11.66. That's still well above the stock's post-merger nadir of $8.70 last summer. But since the merger closed, AOL Time Warner stock has plummeted 75.3%.

contributing: bradley johnson

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