The bad ad environment will catch up to Time Warner (TWX) in a flash. Viacom (VIA) had only just indicated that the markets for advertising sales were dismal. Now TWX is slashing its forecasts.

Time Warner expects to incur certain restructuring charges this year. For the nine months ended September 30, 2008, the Company has incurred approximately $182 million in charges.

In light of these restructurings, which are now expected to total $280 million to $310 million for the year, as well as the challenging economic environment facing certain  businesses, Time Warner now anticipates that full-year growth rate in adjusted operating income before depreciation and amortization will be around 5%, off a base of $12.9 billion in 2007. This compares to the outlook provided on February 6 of a range of 7% to 9%. It also cut cash flow projections.

On the earnings side, Time Warner said EPS will be $1.04 to $1.07, down from the firm’s prior outlook of $1.07 to $1.11.

For the third quarter, revenue rise a fraction to $11.7 billion. Operating income was also up modestly to $2.4 billion The firm beat most Wall St. forecasts.

The only units with strong performances were the company’s cable and networks operations. Cable revenue was up almost 10% to $4.3 billion. Networks rose about 5% to $2.7 billion. 

Magazine publishing and AOL did poorly and since both are in the advertising sector, that could get much worse. Advertising revenue for most print and online business was hurt in Q3 but a number of analysts expect that to get much worse in Q4. Even now, the TWX forecast may be too rosy.

AOL operating income fell from $295 million last year to $268 million. Magazine publishing operating income dropped from $251 million to $162 million.

With cable results at competitors such as Comcast (CMCSA) showing some weakness, Time Warner is running out of businesses that do well.

Douglas A. McIntyre

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