March 31 (Bloomberg) -- Time Warner Inc.’s spinoff of its cable division dropped the New York-based owner of Time magazine and Warner Bros. to third place among U.S. media companies, behind Walt Disney Co. and News Corp.

Disney, based in Burbank, California, reported fiscal 2008 sales of $37.8 billion. Excluding $17.2 billion in cable revenue, Time Warner’s 2008 sales totaled $29.8 billion.

Time Warner divested the unit, the second-largest cable company in the U.S., because it no longer needed the division to guarantee distribution of its channels including HBO and CNN. With the split, which took effect yesterday, Rupert Murdoch’s News Corp. becomes No. 2, with $33 billion in sales.

“Investors want to buy large market names,” Michael Nathanson, an analyst at Sanford C. Bernstein & Co. in New York, said in an interview. He rates Disney, News Corp. and Time Warner shares “market perform.” “It’s better to be Disney than a company that’s a third of the size like Viacom.”

Time Warner spokesman Ed Adler said in an interview the split reflected different strategies.

“Time Warner now is a focused content company,” said Adler. “We have the scale and know-how to make it possible for Time Warner to capitalize on emerging distribution platforms.”

Jonathan Friedland, a spokesman for Disney, already the world’s biggest theme-park operator, and News Corp. spokeswoman Teri Everett declined to comment.

Time Warner gained $1.07, or 5.9 percent, to $19.30 at 4:15 p.m. in New York Stock Exchange composite trading. The shares fell 39 percent last year. Disney, down 30 percent in 2008, rose 31 cents to $18.16 and News Corp. Class A shares advanced 14 cents to $6.62 and declined 56 percent last year.

The split also gives Time Warner cash to rebuild, Nathanson said. The company is still suffering from its failed merger with AOL in 2001, he said.

Time Warner named Google Inc. executive Tim Armstrong to lead AOL this month, making a spinoff of the business more likely, Nathanson said.

To contact the reporters on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net; Sarah Rabil in New York at srabil@bloomberg.net.

Last Updated: March 31, 2009 17:07 EDT