By Karen Jacobs
Time Warner Inc. is committed to turning around its AOL Internet business even as the unit loses customers at a faster than expected pace, the media conglomerate's chief executive said on Friday.
AOL's dial-up subscribers have been defecting to high-speed services largely provided by cable and phone companies as it works to revamp its business as an online provider of entertainment and other services supported by advertising revenue.
"We are committed to completing the transformation of AOL," CEO Richard Parsons told Reuters at the close of Time Warner's annual shareholder meeting in Atlanta.
Some investors, including one who spoke at Friday's meeting, have asked whether AOL might be spun off as its results weigh on overall earnings at the world's largest media company.
AOL "is in a space that the marketplace thinks is contracting and needs to migrate its business to another part of the Internet landscape where the market is growing," Parsons said, referring to efforts to move AOL from a subscription model to an advertising supported operation.
"Our plans are to see that journey through," he said. "I think that if we do that, the market and the stock will react very very positively."
AOL's future was one key point of contention between Time Warner management and billionaire investor Carl Icahn, who challenged the company to break up into four divisions. The two sides reached an agreement in February after a bitter six-month battle over how to boost Time Warner's share value.
Earlier this month, Time Warner reported quarterly results that disappointed Wall Street forecasts, particularly the loss of 835,000 subscribers at AOL compared with a figure closer to 550,000 expected by analysts. AOL accounted for about 20 percent of Time Warner's $10.5 billion in revenue.
Company executives expect to see better subscriber trends and advertising at the unit in the second half of 2006.
Shortly afterward, AOL said it would cut 7 percent of its work force, mostly from customer call centers. On Thursday, the Internet company said it bought Lightningcast, which specializes in inserting ads into online video, in a bid to expand its ad network.
Time Warner shares are nearly flat since the start of the year and have underperformed the Standard & Poor's 500 Index by about 2 percent in that time.
Parsons noted the weak sentiment afflicted most top media companies as investors question how they will preserve growth amid an explosion of competing media options, particularly from Internet leaders Google Inc. and Yahoo .
But he said he believed continued growth in Time Warner businesses, particularly its cable operations, and a $20 billion share buyback will help eventually boost company stock.
Shareholders approved Time Warner's slate of 11 directors and bid farewell to media mogul and CNN founder Ted Turner, who decided in February to step down from the board.
Shareholders also approved a proposal not endorsed by the board to accept a simple majority rule on shareholder votes wherever possible. Parsons said the company would review its stance in light of nearly 80 percent approval for the proposal.
Time Warner shares were unchanged at $17.40 in afternoon trading on the New York Stock Exchange.
(Additional reporting by Michele Gershberg in New York)
Copyright 2006 Reuters Limited.
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