Time Warner (NYSE: TWX - News) has confirmed plans to spin off its 84 per cent stake in Time Warner Cable, as it delivered first quarter earnings which narrrowly missed Wall Street expectations because of falling sales at its AOL internet division.

Jeff Bewkes, chief executive since January, said however that "underlying operating strength" in its cable, networks and film businesses during the quarter "gave us the confidence to reaffirm our full-year business outlook."

The group continues to expect 2008 full-year growth in adjusted operating income before depreciation and amortization to be between 7 and 9 per cent.

Although expected tax benefits from the Economic Stimulus Act will boost free cash flow to "at or above" $4.5bn, it maintained its target for earnings from continuing operations, which it expects to fall in the range of $1.07 to $1.11 per share.

"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," Mr Bewkes said.

The group was "working hard on an agreement with Time Warner Cable, which we expect to finalise soon," he added, without giving further details of a transaction which analysts believe could generate up to $4bn in cash and help reverse a slide in the conglomerate's market value over the past year.

Revenues rose 2 per cent to $11.4bn in the first quarter over the same period of 2007, led by growth in the cable, networks and filmed entertainment divisions.

Restructuring charges of $116m associated with folding New Line Cinema into Warner Bros dragged adjusted operating income before depreciation and amortization down 1 per cent to $3.1bn, leaving earnings at 21 cents per share, compared to 30 cents a year earlier and analysts' expectations of 22 cents.