Another bit of good news can be found in the statement of cash flows. Yes, Time Warner saw a decline in cash from operations. However, I don't believe it is anything to worry about. The amount of green stuff generated was certainly enough to take care of the dividend obligation.

The thing I don't like from the report centers on the issue of home video. Media companies such as The Walt Disney Company (NYSE: DIS), General Electric Corporation's (NYSE: GE) NBC Universal, Viacom, Inc. (NYSE: VIA), and News Corp. (NASDAQ: NWS) are all dealing with the conundrum of a slowing DVD market. And then there's the bad advertising market. According to this Reuters article, comments made by management don't sound encouraging.

Basically, Time Warner's second quarter is a familiar story. It's a company doing what it can to protect cash flows during a downturn. But it's also a company that has to address some serious fundamental problems when it comes to the core business of content distribution. I've talked about this before: the media sector has to make aggressive adjustments to the costs associated with producing and selling content. There's still a long way to go on that front.

Nothing from the earnings report makes me want to buy the stock, and in fact, if I held shares at a profitable cost basis right now, I'd probably book some of the gains. As I've said recently, though, I have found Time Warner's price action very interesting this year, and I am keeping it on a watch list. When it experiences a pullback of awesome proportions (today's action doesn't qualify), then I'll be inclined to consider the company more seriously as a trade.

Disclosure: I own Disney, GE; positions can change without notice.