HBO is laying off about 7% of its 2,400 employees, according to
a person familiar with the matter, becoming the latest division in
Time Warner Inc. to endure cost cutting in the wake of the media
company's rejection of a takeover approach from 21st Century
Fox.
HBO's cost-cutting plans, which were announced to employees on
Tuesday, come as part of planned headcount reductions across Time
Warner. Those cuts include the elimination of about 10% of the
15,000 employees at cable group Turner Broadcasting, which includes
CNN, TNT and TBS, and 13% of personnel costs at Warner Bros.,
according to people familiar with the matter.
Time Warner Chief Executive Jeff Bewkes has previously said that
"every part of our company" is in the midst of such cutbacks.
The divisions that now make up Time Warner employed roughly
26,200 people at the end of last year, according to company
filings.
Time Warner is under pressure to improve its profitability and
raise its stock price after walking away from 21st Century Fox's
$85-a-share offer in July. (Until mid-2013, 21st Century Fox and
News Corp, owner of The Wall Street Journal, were part of the same
company.)
Time Warner shares closed at $79.60 on Tuesday, up 33 cents, and
are up nearly 13% since the company made a presentation Oct. 15 to
investors to lay out its growth plans. At the investor day earlier
this month, Mr. Bewkes promised to "more than double our earnings
over the next several years."
Time Warner CFO Howard Averill said cost controls would be an
important part of that strategy.
"We expect solid revenue growth combined with strict cost
discipline to drive margin expansion over the next few years," Mr.
Averill said.
HBO is the smallest segment of Time Warner in terms of revenue
but has the highest profit margins. In 2013, it had revenue of $4.9
billion and operating income of $1.8 billion. Meanwhile, Turner had
revenue of nearly $10 billion and operating income of $3.5 billion
and Warner Bros. had revenue of $12.3 billion and operating income
of $1.3 billion.
The cuts at HBO were reported earlier by Variety.
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