As previously noted this morning, Time Warner Inc. (NYSE: TWX) did post gains on an EPS that were slightly ahead of expectations on revenues that were a tad under the estimates from First Call. The new $5 billion share buyback plan was to replace the recently completed $20 Billion share buyback plan. The company also reaffirmed $1.07 as its EPS target for the conglomerate. Going into the conference call, shares are down about 3.2% to $18.64.

At the start of the conference call, CEO & Chairman Dick Parsons reaffirmed 2007 OIBDA guidance and is maintaining growth at projections AOL and is maintaining its leverage. It reaffirmed $1.07 EPS for 2007, or $0.95 outside of items. Parsons also stated the following:

Time Warner Cable (NYSE:TWC) is on track for objectives with more upside to come. The legacy footprint has growth and the Adelphia adds should grow. Cable will continue to be a growth generation for years to come.

Harry Potter has generated nearly $700 MILLION in worldwide sales already.

AOL is continuing to make progress for OIBDA growth, it also expects page view growth at AOL this year. This was the first quarter where page views grew, but there was a slowdown in ad growth as certain deals were winding down from the subscriber days. Email and search changes are building and increasing monetization. The team is satisfied with the results so far. Advertising is also seeing some shift to third party advertisers, but its advertising.com is seeing gains. The total AOL expectations are being stepped back from original projections that it will grow above the market rates [that is the first time this has been stated]. It has relaunched the AOL homepage in a new format and is in the process of new finance and other pages. It has spent over $500 million in acquisitions over the last 16 (or 18) months to build the AOL franchise.

Today's Time Warner earnings announcement shows the disappointment that results when shareholders expect a corporate strategy and instead get a conglomerate. With TWX down 1.72% in the earnings announcement's wake, the Chinese water torture continues.  How so?

When a corporate strategy is well-conceived and well-executed, there is a strong economic reason for businesses to be under the same corporate umbrella. Simply put, corporate strategy is about creating value by sharing important capabilities across business units. For example, Wal-Mart gets big volume discounts by purchasing in big quantities from its suppliers. Wal-Mart is also good at measuring what items sell in its stores and which ones don't and stocking the shelves of each store accordingly. Wal-Mart's sustained financial excellence results from its ability to share these capabilities across its discount retailing, grocery, and pharmacy businesses. This sharing gives Wal-Mart a sustainable competitive advantage, keeping its costs below its competitors.

By contrast, a conglomerate holds a diverse collection of businesses among which there is very little sharing. The ostensible reason for the businesses being under the same corporate umbrella is that the different businesses can predictably offset each other's earnings cycles. When one business is down, another one is up and vice versa. The net effect is to smooth earnings.

0:00 I'm listening to the call just after the market open, so I'll report it to you in time elapsed on the call. Everyone's buzzing about Time Warner's much-higher-than-expected earnings, which have still disappointed investors (the stock was down 31 cents to $17.11 at last check). Revenues were just a touch up from the year-ago quarter, to $10.5 billion, and operating income was up 11% to $1.9 billion. The company is churning cash, too, with $1.6 billion in free cash flow.

The big story, of course, is that AOL revenue and income are both down from a year ago. Publishing is down in both areas, too, but no one seems to be mentioning that. If you're looking for good news, there's a lot of it: cable income is up significantly and both "Filmed Entertainment" and "Network" categories show some strong growth in income.

0:25 James Barge, SVP of Investor Relations, takes the mic. He explains the company's odd and non-GAAP measures, including (quite a mouthful) adjusted OIBDA (operating income before depreciation and amortization). It excludes some items, like "non-cash asset impairments" and amounts from sales of business lines. It seems like a sensible financial measure but it's hilarious to hear someone say it. [This from a girl whose friends, it must be admitted, tell accounting jokes to one another. Did you hear the one about EBCOSITDA? Oh, never mind.]

Despite a 59% rise in net profit [pdf earnings report], a few minutes after the market open Time Warner was already down 17 cents on an early spike in volume. CNBC's Squawk on the Street was reporting that investors were disgusted with poor performance at AOL, which lost 835,000 subscribers - 30% more than people had been anticipating. A 26% increase in AOL advertising revenues, and cable revenue up 50%, was still too little to overcome the disappointment in subscribers.

So far, no one has provided color on Time Warner's earnings: we'll report it here to you as soon as we hear it.