Time Warner Inc., the world's largest media company, reported first-quarter profit fell 36 percent on declines at the AOL Internet-access business and said it will separate its cable-systems unit.

Net income dropped to $771 million, or 21 cents a share, from $1.2 billion, or 31 cents, a year earlier, New York-based Time Warner said today in a statement. Excluding some items, earnings of 22 cents trailed the 23 cent average of 17 analysts' estimates compiled by Bloomberg. Sales rose 2.1 percent to $11.4 billion.

AOL's profit declined, while earnings at Time Warner's cable-systems, publishing and TV networks units increased. By getting rid of Time Warner Cable Inc., Chief Executive Officer Jeffrey Bewkes is responding to pressure from investors to focus on the company's entertainment businesses.

``If you separate out cable, the content business is cheap,'' said Paul Greene, media analyst at T. Rowe Price Associates Inc. in Baltimore, which owns more than 59 million Time Warner shares among its $400 billion in assets. ``If they get cash from cable and use that to buy back shares of the parent company, that's very accretive.''

Time Warner shares, down 34 percent from a 2007 high, rose 16 cents to $15.27 yesterday in New York Stock Exchange composite trading.

Buybacks

Bewkes, 55, who became CEO in January, said in February he would complete a review of Time Warner's cable stake by the end of this month. Chris Marangi, a fund manager at Gamco Investors Inc. in Rye, New York, said splitting off the company's 84 percent stake in Time Warner Cable would provide cash to repurchase $3.8 billion in stock.

``We've decided that a complete structural separation of Time Warner Cable, under the right circumstances, is in the best interests of both companies' shareholders,'' Bewkes said in the statement today. ``We're working hard on an agreement with Time Warner Cable, which we expect to finalize soon.''

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