Time Warner Inc. (TWX), the world's largest media company, on Wednesday posted a quarterly loss, dragged down by a $2.4 billion settlement of a shareholder lawsuit that accused the company of overstating its revenue from 1999 to 2002.

The company also said it plans to buy back up to $5 billion in stock over the next two years.

Time Warner reported a second-quarter net loss of $321 million, or 7 cents a share, compared with a year-earlier net profit of $777 million, or 17 cents.

Excluding a number of items, including a $3 billion reserve for the settlement and other pending suits, the company said it posted a profit of 18 cents per share, falling just below Wall Street expectations for profit of 19 cents per share.

Revenue fell 1 percent to $10.7 billion, missing analysts' expectations of $11 billion, according to Reuters Estimates.

Its shares were down 2.4 percent at $17 before the opening bell on Wednesday.

New York-based Time Warner agreed to pay $2.4 billion to shareholders who accused the company of overstating its revenue by $1.7 billion between January 1999 and August 2002.

The estimated after-tax impact of the legal reserves reduced earnings per share by 44 cents, the company said. That's below the $1 per share Wall Street feared Time Warner would have to take, analysts said.

"It's less than the worst-case scenario," said Richard Greenfield, an analyst at Fulcrum Global Partners.

Some on Wall Street expressed concern the company's legal woes may not yet be over. "They need to show us the light at the end of the tunnel," Christopher Marangi, an analyst at Gabelli & Co. said. Gabelli's sister company is a Time Warner stock holder.

The settlement, which will go to millions of shareholders who invested in the company during that time, is the second-largest paid by a publicly traded company, Heins Mills & Olsen, the law firm representing the shareholders said. Time Warner's auditor, Ernst & Young, agreed to pay $100 million as part of the settlement.

In March, the company said it would pay $300 million to settle charges with the Securities and Exchange Commission (search), stemming from similar allegations. Time Warner also agreed to pay $210 million as part of a deferred prosecution agreement with the Justice Department to resolve criminal charges of aiding and abetting securities fraud.

Time Warner restated its results from 2000 through 2003 to reduce online advertising by a total of $679 million.

With the most recent settlement, Time Warner has paid more than $3.5 billion to resolve the accounting issues.

Analysts said the quarter's operating results were disappointing. Film and cable networks profit and revenue were lower than expected, but were offset by robust growth from its cable systems.

The company's movies division, where revenue dropped 15 percent, dragged on overall earnings during a quarter that could not match the performance of top movies franchises like last year's installment of "Lord of the Rings (search)" or another "Harry Potter (search)."

But growth of digital phone customers and high-speed Internet subscribers from its cable unit, which drove the division's revenue up 11 percent, helped prop up results, underscoring Time Warner's commitment to expand the business.

The cable division added 201,000 new high-speed data subscribers and 242,000 digital phone subscribers. It lost 5,000 basic video customers, ending the quarter with 10.9 million customers.

Time Warner agreed to buy Adelphia Communications Corp. (search) earlier this year in a joint bid with Comcast Corp. (CMCSA) valued at around $17.6 billion.

America Online, Time Warner's online division, lost 917,000 subscribers, ending the quarter with 20.8 million U.S. members. Revenue for the unit fell 4 percent, with subscriber losses overshadowing a 45-percent increase in online advertising revenue.