Time Warner beats expectations, but stock falls as investors wonder where growth will come from

The Associated Press reports that BloggingStocks' parent, Time Warner (NYSE: TWX), beat Wall Street expectations by a penny a share. But its profit was still down -- 26% thanks to declining subscriber fees at AOL and lower advertising revenues at magazines like Time and Sports Illustrated.

But after adjusting for one-time gains, Wall Street was expecting Time Warner to make 23 cents a share and it actually earned a penny more. In addition, revenues rose 5% to $11.6 billion, 1.2% more than expected.

The bad news is that AOL's subscription revenue fell 29% which drove a 36% decline in operating income. As I posted, the 2006 change in strategy to emphasize advertising over subscriptions has not been able to make up for $2 billion in lost revenue. Advertising revenue rose a mere 2% to $530 million -- not enough to make up the difference.

What does the future hold? Time Warner is selling the 84% of its cable operations that it still owns to shareholders later in 2008. Cable's revenues grew 7% on "increases in cable, Internet phone and video-on-demand fees." And it is trying to sell the dial-up portion of AOL to Earthlink (NASDAQ: ELNK).