Time Warner Inc (TWX), Time Warner Cable Inc (TWC): Is This Media Giant’s Spin Off Bad News?

Page 1 of 2

Time Warner Inc (NYSE:TWX) has dropped plans to sell its magazine business and, instead, is going to spin the division off. Is this a case of unlocking the value of undervalued assets or is the company just dumping a troubled business?

A Failed Merger

Time Warner Inc (NYSE:TWX) was famously acquired by AOL, Inc. (NYSE:AOL) in what was probably one of the worst mergers in recent memory. Aside from the infighting between the two companies, AOL’s walled garden approach to the Internet was already in decline when they consummated their marriage. The two companies parted ways about a decade after joining forces.

One way of viewing the split is that it let each company focus on its core businesses. However, it was more likely Time Warner Inc (NYSE:TWX) was getting out from under a bad deal. Indeed, AOL’s shares languished amid the company’s struggle to shift to an advertising and content model after the split.

An aggressive read of AOL’s quarterly revenue trends might suggest that the top line is stabilizing. Still, it has plenty of issues and lots of Internet competition to deal with. Moreover, the AOL brand isn’t nearly as valuable as it once was.

The rally in the last year or so has provided shareholders some solace—but it was a long time in the making. Time Warner investors should keep this corporate action in mind, but would do well to avoid the AOL cast off for now.

A Strategic Separation

After the AOL split, Time Warner Inc (NYSE:TWX) separated out its cable business, Time Warner Cable Inc (NYSE:TWC). This was a strategic decision by the company to break off a cash cow business so it could focus on its higher growth media assets.

The move made complete sense for Time Warner and, unlike AOL, it has so far proven to be good for Time Warner Cable Inc (NYSE:TWC) shareholders, too. The big difference between the two deals is that the cable business was a solid one when it was broken off, unlike AOL. It isn’t surprising, then, that the stocks of the two companies took different paths.

Time Warner Cable Inc (NYSE:TWC) continues to enjoy a solid industry position. However, the market is well aware of this and has bid the shares up to a point where they look fully valued, despite a recent pullback. Some investors looking for a dividend paying company with an annuity-like revenue stream might be tempted by the 2.5% or so dividend yield, but it’s probably best to look elsewhere.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!