Time Warner Mulls Its Options With Future of Cable Stake- WSJ

The Wall Street Journal reports that Time Warner Inc.'s management is currently weighing whether their company should reduce its stake in Time Warner Cable Inc., of which it owns 84%. Management concerns stem not from present performance - the cable systems business is currently the parent company's top earner. Rather, as News Corp. got rid of its stake in DirecTV Group last month as its subscriptions growth slowed, Time Warner believes the internet will increasingly replace cable as the primary entertainment source for cable-style programing in the U.S., with the ensuing result being a decrease in margins at Time Warner Cable. While the Journal believes it's unlikely Time Warner will sell its entire stake in Time Warner Cable, a reduction in its stake size and diversification into other businesses is seen as likely. According to Pali Capital analyst Richard Greenfield, "Both companies would trade better if they were separated." Management will present several alternatives for its intentions with Time Warner Cable to the board next month as part of the company's annual strategic review. Among the possibilities may be an attempt to purchase a major internet player, like News Corp. did with MySpace. Time Warner already owns AOL, a unit which has been raised as a spinoff possibility.

Sources: Wall Street Journal, Reuters, TradingMarkets.com
Commentary: Time Warner Cable: Stock in Steady Slide • Time Warner's Attempts to Embrace New Media • What Will Pay For The Online Video Explosion? Transit Bandwidth Inflation
Stocks/ETFs to watch: Time Warner Cable Inc. (TWC), Time Warner Inc. (TWX). Competitors: News Corp. (NWS), Viacom, Inc. (VIA), Comcast Corporation (CMCSA), DIRECTV Group, Inc. (DTV), Cablevision Systems Corporation (CVC), EchoStar Communications (DISH). ETFs: PowerShares Dynamic Media Portfolio ETF (PBS), PowerShares Dynamic Leisure & Entertainment (PEJ)

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