Time Warner Inc., the world's largest media company, said Wednesday that third-quarter profit jumped 80 percent on rising sales at its cable-television unit. The company will more than double share buybacks to $12.5 billion.
Chief Executive Officer Richard Parsons increased the stock-repurchase plan from $5 billion after billionaire investor Carl Icahn pressured the company to bolster its share price. Parsons said Wednesday on a conference call that other large shareholders told him acquiring stock was the best use of the company's cash.
Time Warner's profit beat analysts' estimates, driven by a 15 percent jump in earnings at the New York-based company's cable unit, which added 149,000 digital-TV subscribers. Profit also rose at the America Online Internet service and cable channels including HBO and CNN. Icahn is seeking a spinoff of the cable systems to lift the shares, which through Tuesday have fallen 8 percent this year.
"They are being responsive to what Icahn is suggesting without taking it all the way," said James Goss, an analyst with Barrington Research Associates in Chicago, who rates the stock "outperform." "It's a reasonable mid-point compromise."
Time Warner, which also owns the Warner Bros. film studio, reported third-quarter net income of $897 million, or 19 cents a share, compared with $499 million, or 11 cents, a year earlier, when the company had costs of $500 million to settle accounting probes. Sales gained 6 percent to $10.5 billion, the company said.
Profit beat the average estimate of 17 cents from 24 analysts polled by Thomson Financial.
Shares of Time Warner rose 33 cents to close at $17.90 Wednesday on the New York Stock Exchange. Class B shares of New York-based Viacom Inc., the No. 3 U.S. media company, rose 18 cents to $31.73 Wednesday after the company Tuesday reported profit rose 1.8 percent to $735 million on higher sales at its cable-TV channels and film studio.
Sales at Time Warner Cable, the No. 2 U.S. cable provider behind Comcast Corp. with 10.9 million subscribers, rose 13 percent to $2.4 billion. Profit of $945 million beat the $915 million average estimate of five analysts surveyed by Bloomberg News.
Time Warner Cable added 240,000 digital-phone subscribers during the quarter, raising the total to 854,000, and signed up 234,000 fast Internet access customers for a total of 4.6 million.
The digital-phone customer number fell short of estimates by Merrill Lynch & Co. analyst Jessica Reif Cohen, who expected 250,000 new subscribers. The Internet-access gain was higher than her forecast of 195,000.