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Time Warner sees profit dip

Time Warner has reported revenue growth of 5% for its third quarter, but net income declined.

The company may also have to restate its financial results for 2002 in connection with the investigation of accounting practices at its America Online (AOL) division. It has set aside $500m (£270m) to cover its expected legal costs.

Revenue for the three months to 30 September climbed to $9.97bn, from $9.50bn a year earlier, driven largely by increased advertising sales. All of its divisions produced slight growth, including its AOL, cable, movie and network TV groups.

Consolidated net income for the quarter declined, however, to $499m compared with $541m for the third quarter of 2003, Time Warner said.

Revenue from its AOL division inched up 1% from a year earlier, to $2.14bn. This was driven by a 44% increase in advertising sales - driven in turn by a 70% hike in revenue from domestic paid search services. The advertising gains helped offset a 3% decline in AOL subscription revenue, Time Warner said.

AOL had 22.7 million subscribers in the US at the end of September, down 646,000 from the prior quarter and down two million from the third quarter of 2003. In Europe, the service had 8,000 fewer subscribers than at the end of the second quarter, but 33,000 more than at the same time in 2003.

The US Securities and Exchange Commission and the Department of Justice continue their probe of Time Warner, mainly over concerns about past accounting practices at the AOL division. The concerns focus on advertising arrangements, the way AOL reported subscriber numbers and the way it handled accounting for AOL Europe.

In connection with the concerns at AOL Europe, Time Warner said that it may have to restate its financial results for 2002.

Time Warner also reaffirmed its previously stated financial targets for 2004.

James Niccolai writes for IDG News Service


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