Post by dkennedy on Mar 18, 2005 6:44:22 GMT -5
Breakups: Next big thing for Time Warner?
By Russ Britt, Markethingych
Last Update: 5:14 PM ET March 17, 2005
LOS ANGELES (Markethingych) -- Judging from investor reaction, breaking up may not be hard to do among media conglomerates.
It may be the thing to do.
Viacom's (VIA: news, chart, profile) (VIA.B: news, chart, profile) proposal to split itself into two separate units seemed to tickle the fancy of investors in other media companies. Most major conglomerates climbed substantially higher.
Most prominent was Time Warner (TWX: news, chart, profile) , the world's largest media company, which still furrows the eyebrows of investors who long for the days before America Online became a part of that leviathan - an act that sent the stock tumbling in 2001.
Viacom said Wednesday it is considering splitting its cable operations such as MTV and Showtime from its CBS television and Infinity radio broadcast groups.
As a result, Time Warner shares jumped by 50 cents, or 2.8 percent, to close at $18.60, raising the question of whether the company's board should consider a move similar to that of Viacom.
"It's moving on exactly this, I think," said Laura Martin of Soleil/Media Metrics. She said investors are considering the possibility that some of Time Warner's less-valued assets, such as its cable systems group, might be separated out to highlight its stronger entities -- namely its cable channels.
Time Warner's cable TV subscription services have long been considered to be a drag on the company. Its plans to jointly acquire Adelphia Communications (ADELQ: news, chart, profile) with Comcast Corp. (CMCSK: news, chart, profile) would offer it the chance to do a "reverse merger" in which it puts its cable entities under the Adelphia name and stock symbol.
That would allow the company to keep it separate from its other entities, including its valuable cable channels such as TBS, TNT, HBO and CNN, Martin said.
A potential Viacom spinoff along with Liberty Media's (L: news, chart, profile) reported plans to break out its Ascent Media and Discovery cable channel operations ratchets up the pressure for Time Warner to consider a similar move, Martin said.
The move by Time Warner shares actually exceeded that of Viacom on a percentage basis. Viacom preferred shares were up 33 cents to $37.33. Meanwhile, Viacom Class B shares jumped 72 cents, or 2 percent, to $36.72.
Should Time Warner also considering unloading America Online? James Goss of Barrington Research says not yet.
"It could be premature, I think, to do something with AOL," Goss said.
Now that Internet advertising is on the rebound, AOL gives the company an additional outlet.
"Now that you've effectively solved a lot of the problems, you might as well take advantage of some of the benefits," Goss added.
Also on the rise Thursday was News Corp. (NWS: news, chart, profile) , up 27 cents, or 1.5 percent, to $18; and its Fox entertainment unit (FOX: news, chart, profile) , up 74 cents, or 2.1 percent, to $35.96.
Martin said News Corp.'s cable assets, including the Fox sports channels, FX and the Fox News Channel, might make an attractive spinoff.
Viacom said that it still is considering the proposal, and will have a final decision in the second quarter.
At the very least, Viacom is unearthing the assets at both its own company as well as others', Goss said.
"Maybe Viacom's just drawing attention to the fact that value still exists," he said.
By Russ Britt, Markethingych
Last Update: 5:14 PM ET March 17, 2005
LOS ANGELES (Markethingych) -- Judging from investor reaction, breaking up may not be hard to do among media conglomerates.
It may be the thing to do.
Viacom's (VIA: news, chart, profile) (VIA.B: news, chart, profile) proposal to split itself into two separate units seemed to tickle the fancy of investors in other media companies. Most major conglomerates climbed substantially higher.
Most prominent was Time Warner (TWX: news, chart, profile) , the world's largest media company, which still furrows the eyebrows of investors who long for the days before America Online became a part of that leviathan - an act that sent the stock tumbling in 2001.
Viacom said Wednesday it is considering splitting its cable operations such as MTV and Showtime from its CBS television and Infinity radio broadcast groups.
As a result, Time Warner shares jumped by 50 cents, or 2.8 percent, to close at $18.60, raising the question of whether the company's board should consider a move similar to that of Viacom.
"It's moving on exactly this, I think," said Laura Martin of Soleil/Media Metrics. She said investors are considering the possibility that some of Time Warner's less-valued assets, such as its cable systems group, might be separated out to highlight its stronger entities -- namely its cable channels.
Time Warner's cable TV subscription services have long been considered to be a drag on the company. Its plans to jointly acquire Adelphia Communications (ADELQ: news, chart, profile) with Comcast Corp. (CMCSK: news, chart, profile) would offer it the chance to do a "reverse merger" in which it puts its cable entities under the Adelphia name and stock symbol.
That would allow the company to keep it separate from its other entities, including its valuable cable channels such as TBS, TNT, HBO and CNN, Martin said.
A potential Viacom spinoff along with Liberty Media's (L: news, chart, profile) reported plans to break out its Ascent Media and Discovery cable channel operations ratchets up the pressure for Time Warner to consider a similar move, Martin said.
The move by Time Warner shares actually exceeded that of Viacom on a percentage basis. Viacom preferred shares were up 33 cents to $37.33. Meanwhile, Viacom Class B shares jumped 72 cents, or 2 percent, to $36.72.
Should Time Warner also considering unloading America Online? James Goss of Barrington Research says not yet.
"It could be premature, I think, to do something with AOL," Goss said.
Now that Internet advertising is on the rebound, AOL gives the company an additional outlet.
"Now that you've effectively solved a lot of the problems, you might as well take advantage of some of the benefits," Goss added.
Also on the rise Thursday was News Corp. (NWS: news, chart, profile) , up 27 cents, or 1.5 percent, to $18; and its Fox entertainment unit (FOX: news, chart, profile) , up 74 cents, or 2.1 percent, to $35.96.
Martin said News Corp.'s cable assets, including the Fox sports channels, FX and the Fox News Channel, might make an attractive spinoff.
Viacom said that it still is considering the proposal, and will have a final decision in the second quarter.
At the very least, Viacom is unearthing the assets at both its own company as well as others', Goss said.
"Maybe Viacom's just drawing attention to the fact that value still exists," he said.