Time Warner pinning hopes on Superman

Superman returns to the big screen after a long hiatus this week. Will investors come back to Time Warner?

Time Warner shares rose more than 1 per cent on Monday, with some investors who attended early screenings of "Superman Returns" saying the Man of Steel could put a new shine on a company that has seen its stock sputter since talk of a breakup subsided earlier this year.

But others say they are looking for much more than just one hit after the US$160 million ($269 million) maritime disaster movie "Poseidon" flopped at US box offices in the spring, netting only US$20.3 million in its first weekend.

"Superman is not coming to save the day for Time Warner," said Richard Steinberg of money management firm Steinberg Global Asset Management, which owned 19,000 shares of Time Warner stock as of March 31.

Although the success of any single movie rarely contributes noticeably to the profits at giant media conglomerates like Time Warner, which is expected to generate more than US$44 billion in revenue this year, the company needs a hit, which could rekindle investor interest.

Time Warner has watched its shares stall since Feb. 17, when billionaire investor Carl Icahn abandoned his quest to break apart Time Warner to raise its share price in exchange for the company's agreement to a US$20 billion buyback. Shares have fallen 3.4 per cent.

Some investors are banking on "Superman Returns," the first film featuring the comic book superhero in 19 years, for a stock lift.

"I think (the movie) is very important and it's going to be very very large," said Larry Haverty, a portfolio manager at Gamco Investors Inc., which owned 14 million shares of Time Warner as of March 31.

Haverty, who saw the movie earlier this month, said he expected "Superman Returns" to generate US$700 million to US$800 million in ticket sales globally.

"Superman" initially is likely to have a negative impact on Time Warner's current quarter. The movie's estimated US$200 million production costs will be booked in its second quarter, ending June 30, just two days after the film opens on Wednesday.

Most profits -- expected to come from international sales and DVD sales -- will not hit until six months after the film's initial release.

"There's a tidal wave of cash flow coming in," Haverty said of "Superman Return's" potential profit.

Others say it's more important for Time Warner to persuade investors it has figured out what role its AOL online division plays in the new media world, and if the firm will walk away from buying bankrupt Adelphia Communications Corp..

"The keys from this perspective are what happens to AOL and what happens to cable. It doesn't make that much difference if ('Superman Returns' is) going to be a hit movie," said Morris Mark of Mark Asset Management, which owns about 1.22 million shares of Time Warner as of March 31.

Adds Steinberg, "We've been overly patient."

- REUTERS