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Warner Music Still Declining
8-May-2008
Written by: Nolan Maloney
Loss of CD sales leads to dividend suspension.
In order to curb their $2 billion debt, holding only a cash balance of $249 million, Warner Music took the next logical step—axe shareholders’ dividends.
“We decided to suspend the dividend in order to take a conservative approach to cash management,” says Chief Executive Edgar Bronfman. “(The move) allows us to reduce the net debt and maintaining level of A&R investment. That's the best combination to create equity appreciation for shareholders.”
Warner Music’s plan has raised questions about the company’s money handling abilities; its stock is currently down 22 percent.
“We are not concerned about our ability to meet our debt covenants,” Bronfman says.
However, Warner Music has not been able to keep up with the consumer switch to digital media. The fiscal second quarter loss is tallied at $37 million, or 25 cents per share; compared to the same quarter last year, the loss amount has increased by $10 million—6 cents per share. Devastating statistics to the world’s third largest music company.
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