UPDATE: I want to clarify the situation with Time Warner‘s stock — which is doing better today than my comment below indicates. Although the current price is down from the close on Friday, it’s up if you adjust that number to take out the value of Time Inc. That’s a fair thing to do for an apples-to-apples comparison, and it shows Time Warner shares up about 1% in morning trading.
PREVIOUS, 7:53 AM: Investors gave Time Inc a rude welcome this morning as the legendary magazine operation became a publicly traded company, but didn’t reward Time Warner as it officially became an all movie and TV power. Time Inc shares on the New York Stock Exchange are down 5.5% in early trading from the prices being paid on Friday for the stock on a “when issued” basis. Time Warner is down 3.3%, and touched a 52-week low of $68.15. The entertainment giant’s investors received one share of Time for every eight shares they own in Time Warner.
Time Warner CEO Jeff Bewkes answered one hanging question for his company — whether it might change its name now that it no longer includes Time: It won’t. “The name Time Warner has a great heritage and stands for leadership as the world’s best storytelling company, as well as leadership in harnessing technology to enhance the accessibility and value of our content to consumers everywhere,” he said in a memo to staff.
But there are a lot of uncertainties at Time, whose 90 magazines (with 23 in the U.S.) include People, Entertainment Weekly, Time, Fortune, and Sports Illustrated. Editors have been told to expect “deep cuts in staffing and other areas,” The New York Times reports this morning. Indeed, Wall Street is looking for signs that the publishing company will tighten its belt and pay a recurring dividend. That was part of the case that Wells Fargo’s Eric Katz made this morning for investors to buy the new stock. For the most part, bulls are betting that Time can transform itself from a legacy magazine publisher into a forward-looking digital power. Online ad sales only account for 15% of the company’s total advertising. Management “has been very upfront about the fact that the company has been slow to adapt to this shift,” Katz says — although “Time has massive scale and audience reach to go along with a solid reputation and brand recognition.” That could make Time a takeover target — but probably not for a while: It has to wait two years before a sale in order to keep the spinoff tax free.
CEO Joe Ripp told staffers in a memo today that “we face strong headwinds in this business. But when I returned to Time Inc. nine months ago, I said I believed this company could do incredible things. I remember the company that shaped the agenda for the nation. I remember the company that started HBO and revolutionized the way the country consumed video content. I remember the company that became the largest and most successful publishing company on earth. We are still that company.”
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