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

The Magazine Split

The original plan to sell most of the company’s magazines to a specialty magazine publisher was a good one for shareholders. It would have left Time Warner Inc (NYSE:TWX) with its core magazines and still unlocked some value via the sale. The decision to drop the sale and, instead, spin off the business isn’t likely to work as well. At least for those holding the magazine business’ shares.

Like AOL, Time Warner’s magazine business is struggling. In fact, it is easily the weakest division at the company. There is little doubt that the spinoff is about jettisoning a troubled business, not unlocking the value of the magazine division. In fact, without the support of Time Warner’s stronger businesses, the magazine group will face even stiffer headwinds.

While retaining the Time and Sports Illustrated magazines will be a blessing for the soon to be stand-alone company, that won’t be enough to change the long-term trends it is facing. Print magazines are in a slow decline and the shift to digital publishing hasn’t been particularly smooth. That means Time Warner’s magazine spin off will start life already trying to dig itself out of a hole.

Good for Time Warner

Getting out from under the magazine business will be good for Time Warner Inc (NYSE:TWX) and its shareholders. However, investors should avoid the magazine company because it looks at lot more like AOL than Time Warner Cable Inc (NYSE:TWC).

The article Is This Media Giant’s Spin Off Bad News? originally appeared on Fool.com and is written by Reuben Gregg Brewer.

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