Stock of the Day
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Warner Music Group (WMG)
Warner Music Posts Wider Q2 Loss
Recording company Warner Music Group posted a loss of $27 million, or 19 cents a share, in the second quarter. The company was hurt by a drop in revenue, as well as by costs from restructuring plans. Excluding the restructuring costs, the company would have posted a loss of 10 cents a share, just below analysts' estimates for a loss of 9 cents a share. In the year-ago period, Warner also posted a loss, though that was just $7 million, or 5 cents a share. Due to declines in CD sales, the company has started to shift towards other areas, but will those changes actually be effective?
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Warner's plans involve 400 job cuts, mostly in CD sales, and the company expects those cuts to be completed by the end of the year. The goal of the job cuts isn't really for savings though, as the company plans on expanding its operations in other areas. During a conference call on Tuesday morning, Edgar Bronfman Jr., the Chief Executive of Warner Music Group, said, "We're not going to be able to save our way to growth." Some areas Warner is exploring include online video and computer gaming. The company recently created a unit to promote video programming for the internet, network TV, and home video devices.
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The company has cited a drop in CD sales and an increase in piracy as factors that have hurt their overall position. Total revenues for the company amounted to $784 million in the second quarter, topping analysts' estimates of $738.1 million. While CD sales fell, digital revenue increased by 23 percent, from $90 million last year to $111 million this year. Publishing revenues also increased, up to $143 million from $129 million last year. Recorded music revenues were down overall though, falling by 1 percent domestically, and 8 percent internationally.
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The company plans on restructuring charges this year to amount to somewhere between $65 and $80 million, and has said, "Our realignment initiatives are designed to improve our effectiveness, flexibility, structure and performance." Evan Wilson, an analyst with Pacific Crest Securities, said, "Warner was able to post a revenue decline that was far less than expectations because of its acquisitions and its continued shift in digital revenue." So while the overall income for the second quarter was slightly below expectations, on the plus side Warner still fared better than competitors in the industry in some respects. While it remains to be seen how effective the restructuring will be, it looks like Warner is poised to better take advantage of the market areas where they still have strength.
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Profile |
Warner Music Company, Inc. offers recorded music and music publishing services worldwide. The company's recorded music operations consist of the discovery and development of artists, and the related marketing and distribution of recorded music produced by such artists. It also markets its music catalog through compilations and reissuances of previously released music and video titles, as well as licensing of tracks to/from third parties for various uses, including film and television soundtracks. The company's music publishing operations owns or controls the rights to approximately one million musical compositions, including pop music hits, American standards, folk songs, and motion picture and theatrical compositions. Warner Music Company was incorporated in 2003 and is headquartered in New York City. As of December 16, 2004, Warner Music Company, Inc. is a subsidiary of WMG Holdings Corp.
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