Cable may fund TW's Web acquisitions

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A month after the public offering of its most profitable subsidiary, Time Warner Cable, its parent company might sell off some of it in order to fund Internet acquisitions, according to published reports Tuesday.

Time Warner declined comment on the story first reported by the Wall Street Journal, but analysts appeared skeptical Tuesday.

Prudential Equity Group analyst Katherine Styponias said the article "makes it appear as if the company is contemplating some pretty major shifts in its portfolio mix in the near term. We do not believe that to be the case."

According to the Journal, which cites people familiar with the situation, Time Warner will discuss next month at a board meeting options involving TWC, including selling some of it so it can buy Internet assets to complement AOL, which is seeing success in its turnaround efforts after years of languishing as a slow-speed Internet access provider.

But AOL, Styponias said, "wouldn't necessarily get a boost in its valuation just because it bought something."

While some see cable TV as a business losing luster because of improvements to, and competition from, Internet video technology, others see long-term health in cable.

In fact, one alternative Time Warner CEO Richard Parsons and the rest of the board might discuss is using TWC shares to make cable acquisitions, perhaps buying Cox Communications or Cablevision System Corp., Styponias said.

A decrease in Time Warner's 84% stake of TWC "would likely not be through outright sale but through acquisition, which hardly signals that it doesn't believe in this business," Styponias said.

She also said a complete sale of TWC — a company with a market capitalization of $37.8 billion that boasted about $12 billion in revenue last year — is the most unlikely scenario, in part because of tax implications.

Shares of Time Warner were off 1.2% on Tuesday to $20.88, while TWC shares sank 1.9% to $38.71.
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