Time Warner Inc. (TWX) on Wednesday posted a better-than-expected second-quarter profit on higher advertising sales at its television networks and a record box office from its latest "Harry Potter (search)" movie.

The world's largest media company raised its profit forecast for the overall company and for its America Online Internet unit, sending shares up 1.5 percent in pre-market trading.

The New York-based owner of the Warner Bros studios, CNN and HBO posted a quarterly net profit of $777 million, or 17 cents a share, compared with $1.06 billion, or 23 cents a share, in the year earlier quarter.

The 2003 quarter included gains of 12 cents per share from the sale of Comedy Central cable channel and a settlement with Microsoft Corp.

Revenue rose 10 percent to $10.9 billion.

Analysts, on average, expected the company to post a 15 cents a share profit and revenue of $10.44 billion, according to Reuters Estimates.

AOL lost 668,000 subscribers compared with the first quarter of 2004. The number of billed subscribers rose by 85,000.

Time Warner said the Securities and Exchange Commission (search) and the Department of Justice (search) continue to investigate the company's accounting practices, particularly at AOL. The SEC probe could result in the restatement of company financial statements, Time Warner said.

AOL's operating profit before depreciation and amortization jumped 13 percent from the year-earlier period, with a moderate increase in revenue led by a 23 percent rise ad revenue.

"The strength of the AOL cash flow and billed subscribers were better than investors were expecting and an increase in full-year guidance is clearly a good sign," said Richard Greenfield, an analyst at Fulcrum Global Partners.

Time Warner, which cut its debt to $18.1 billion from crippling $30 billion levels in early 2003, is now expected to hunt for new acquisition targets. Both bankrupt cable operator Adelphia Communications Corp and film studio Metro-Goldwyn-Mayer Inc. are seen as possible targets of Time Warner.

The company raised its profit outlook and expects operating income before depreciation and amortization, excluding items, to rise in the low-double-digits to low-teens percentage range, from $8.7 billion in 2003. Its earlier forecast was for growth in the low-double-digit range.

It also raised targets for America Online, seeing growth in adjusted operating income before depreciation and amortization to reach the low-to-mid-teens range, compared with $1.5 billion in 2003. Earlier expectations were for a low-double-digit growth range.