Bewkes Mulls TWC Future

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New Time Warner CEO Jeff Bewkes says he's going to do something to fix Time Warner Cable (TWC), but he told analysts last week he's not quite sure what.

TWC posted earnings growth of 19% on a 12% gain in revenues for the quarter, due in part to its acquisition of systems from Adelphia Communications. But while it has pumped money into its premium phone and Internet services, the company reported losing 50,000 basic-video subscribers. That feeds Wall Street's fears about competition in the video space from telephone companies.

Bewkes says parent Time Warner will immediately review its 84% ownership stake of separately traded Time Warner Cable, but analysts said they were confused about whether he wanted to split the asset off entirely or buy more of it at deflated prices.

"They love cable, believe it's undervalued, but believe it is structurally problematic," read a report by Pali Research's Rich Greenfield and Mark D. Smaldon.

With cable stocks struggling, unloading it is unlikely. Bewkes says he'll have a plan by the time the company reports first-quarter results at the end of April.

"Nobody should think we've lost faith in cable's business products," he said. "Quite the opposite: We think it's undervalued—substantially undervalued. It's maybe best not positioned within Time Warner."

Time Warner's struggling stock is down 29% from last year.

Bewkes announced two areas of cuts —reductions of more than 15% at the corporate level, which he said would trim the company's run rate by $50 million per year, and cost cuts at its New Line movie studio. Bewkes also is mulling a split of AOL's online advertising business from its Web access business.

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