When embattled Time Warner (NYSE: TWX) CEO Jeff Bewkes gets on the company's fourth quarter earnings call next week, February 4, he will certainly be asked one thing. With the advertising market facing one of its worst periods in years, how does he intend to keep profit margins high? Several of the company's businesses, particularly magazine group Time, Inc., AOL (parent company of BloggingStocks), and the firm's cable networks, rely on advertising for a large portion of their revenue.
Late last year, Time, Inc. cut 600 jobs. AOL just said it would let another 700 people go. No plans have been announced for cable operations like CNN, but those may come.
The problem Bewkes has is that the drop in advertising appears to be accelerating in 2009. What was a modest issue in late 2008 has almost certainly become a bigger headache in the first quarter of this year. Bewkes has talked about selling AOL and Time, Inc., but the deep recession has probably undermined their values.
If Bewkes can't answer how he plans to tackle the sales issues at his advertising-supported units, TWX stock is headed south.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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