Did Time Warner Wait Too Long To Spin Off Time Inc?

Wall Street's divided on the question this morning, with Time Warner shares up just 1.3% following the announcement last night that it will convert the publishing unit into a separate company by year end. Make no mistake: Investors like the news, which will enable them to just bet on Time Warner's thriving TV and movie businesses. Jettisoning the declining magazines is 'the final leg of a multi-year divestiture story that should leave [Time Warner] with an improved asset mix and growth profile,' Barclays Equity Research's Anthony DiClemente says. But some say that the announcement is a bit of a yawn because CEO Jeff Bewkes waited too long. 'In this case, freedom is just another word for nothing left to lose,' Nomura Equity Research's Michael Nathanson says, channeling his inner Kris Kristofferson. 'Today's spin could have happened 5 or 10 years ago' and won't make a difference now because 'Time Inc is so small and its prospects so uncertain.' Yet Janney Capital Markets' Tony Wible calls the announcement 'ideally timed, as there is still some uncertainty around how the move to digital will affect the publishing business.' Shares Time Warner investors will receive in an independent Time Inc could become attractive if the publishing company can cut costs and establish itself as a digital power. Perhaps the loudest applause for the announcement comes from Susquehanna Financial Group's Vasily Karasyov. Time Warner shares, up 53.7% over the last 12 months, have largely benefited from diminishing fears that Netflix might take a bite out of HBO, TBS, and TNT.  Once the lagging publishing unit is gone, the Street could see 'the emergence of a bull case' for Time Warner. That'll have to wait, though, until more is known about the spin off, including how much debt the entertainment company will load on to Time Inc. Without that information, analysts' valuations for the magazine company range from $2.8B (Wells Fargo's Marci Ryvicker) to $4.2B (Macquarie Securities' Tim Nollen).

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