Time Warner was still dogged yesterday by the weakening performance of its internet service provider AOL, despite attempting to begin anew by dropping the brand from its logo a week ago.
In its third-quarter results, Time Warner said the online division lost a further 688,000 subscribers.
The total customer base of 24.7 million is now two million lower than it was a year earlier. Advertising revenues continued to decline sharply, falling 33%.
Reports in the US yesterday added further to the problems faced by the division. According to the New York Times, the securities and exchange commission, the US financial watchdog, has subpoenaed Time Warner chief executive Richard Parsons and former chairman Steve Case for questioning as part of its long-running investigation into accounting at AOL.
Time Warner and the SEC declined to comment.
The issues surrounding AOL soured an otherwise robust performance from Time Warner during the third quarter. The company posted sharply higher profits of $541m (£319m), a near tenfold improvement on the $57m reported a year earlier. Revenues were 4% higher at $10.3bn.
The company was boosted by a strong performance from its cable networks including Sex and the City creator HBO and news channel CNN, which improved operating profits by 9%.
The filmed entertainment division including the Warner Bros Studio also increased operating profits by 21%, aided by the DVD releases of The Matrix Reloaded and the second instalment of Lord of the Rings.
There were also disappointments. Profits fell by 25% to $158m at the publishing division, which produces Time and People magazines, owing to a weak advertising environment.
Time Warner also said it would take a non-cash charge of up to $1.6bn in the fourth quarter relating to the write down of assets in its music division, home to Madonna. The company said the review had been prompted in part because of a "possible transaction". It is in negotiations to sell a majority stake in the business to British music group EMI.
Mr Parsons said the group had met its debt reduction goals for the year. It ended the period with debts of $24.1bn and claims to be on track to cut that further to $20bn. Mr Parsons was upbeat about the company's prospects. "From my perspective, things are looking much better," he said.
AOL remains the chief concern. Revenues at the online division fell 4.5% to $2.1bn and operating profits dropped by 7% to $150m. The company has been losing subscribers as users migrate to high-speed services.
Time Warner recently said that it would offer a low-cost dial-up service under the Netscape brand in an effort to stem the outflow of subscribers. It is also trying to sign broadband customers and during the quarter added about 340,000.
