Media & Multimedia
Clock is ticking at Time Warner
Auteur : The Business online
Du : 06/11/2005
The departure of Steve Case coincides with calls to break up the media giant
UNDER pressure from activist investor Carl Icahn, Dick Parsons, Time Warner chief executive, relented last week and raised the number of shares in a buyback plan aimed at helping the media conglomerate’s share price. But Parsons couldn’t resist taking a swipe at Icahn in the process.
Icahn, who first made a splash on Wall Street with his 1985 hostile takeover of TWA, has been a pain in Parsons’ posterior for the past few months.
Like many Time Warner investors, Icahn has been fed up with a share price that has stagnated around $18 (E26.5, $32) for well over a year. But Icahn is not like most Time Warner investors.
He has threatened to increase his 2.9% stake in the huge US media company to give him more influence over the composition of the board, including a seat for himself.
After weeks of resisting him, Parsons gave in – somewhat. Last Wednesday he said Time Warner would increase its shares buyback plans from $5bn to $12.5bn of shares. Icahn had been demanding a buyback worth $20bn.
He argues that the company had a sufficiently strong cash flow and low enough debt to withstand the larger deal.
Parsons says he wasn’t influenced by Icahn in his decision to up the amount, but few accept that explanation. Shares gained 1.9% on the news, to close on Wednesday at $17.90. But they fell back to open at $17.66 on Friday.
Parsons dismissed Icahn as a short-term investor who is looking for a quick uplift in Time Warner’s shares that he would then immediately dump for a profit.
Icahn derided Parsons’s buyback plan as “baby steps”. He did not return calls seeking further comment, but is clearly not happy with Parsons’ decision.
The pressure on Parsons also led him to hint strongly in the past few weeks that he was willing to sell a sizeable stake in Time Warner’s America online unit AOL, which has been on a bit of a rebound.
Though it is still losing subscribers at a rate of 2m a year to a myriad of cheaper, broadband internet service providers flooding the market, it is still the largest ISP in the United States and delivers wads of cash to the parent company.
AOL’s rebirth has come with a new strategy to reinvent itself as an ad-rich portal to other content on the net, rather than the dial-up, all-inclusive service it had been.
AOL has moved to an all-internet platform and away from its own costly software. Subscribers no longer need the software, but can sign on using any browser, where they can view ads that brought in $1bn in revenue in the past year.
There was some surprise at the frenzy that ensued after it became known that a minority stake would be made available. Google, Microsoft and MSN became earlier suitors.
But Parsons last week tried to downplay the AOL talk. In a conference call with analysts, he said discussions were too fluid to know whether there would be a deal.
Parsons last week lost AOL’s founder and first chief executive Steve Case, who had remained on the Time Warner board after giving up the top job at AOL.
It was Case who with Jerry Levin of Time Warner engineered what has come to be known as the worst merger in Wall Street history.
In the heady days of the dot.com boom at the end of the millennium, it seemed like the perfect combination: Time Warner’s massive content library with AOL’s new-fangled distribution system over the net.
Case remains convinced that it was a good deal and that in time he will be shown to have been right.
Certainly the kind of convergence he envisioned is just now beginning to take shape, with cable television, internet, and telephone companies crossing over into each other’s businesses.
The busting of the tech bubble hit AOL-Time Warner hardest with more than $200bn of shareholder value wiped out. First the AOL moniker was jettisoned from the corporate name: now the founder has gone to develop his own business in the healthcare field.
Parsons’ buyback scheme and Case’s departure coincided last week with Time Warner’s third-quarter earnings results.
They showed an increase in revenue from $9.9bn a year earlier to $10.5bn this year. Net income rose 80%, from $499m to $897m. Even that performance won’t silence Icahn.
UNDER pressure from activist investor Carl Icahn, Dick Parsons, Time Warner chief executive, relented last week and raised the number of shares in a buyback plan aimed at helping the media conglomerate’s share price. But Parsons couldn’t resist taking a swipe at Icahn in the process.
Icahn, who first made a splash on Wall Street with his 1985 hostile takeover of TWA, has been a pain in Parsons’ posterior for the past few months.
Like many Time Warner investors, Icahn has been fed up with a share price that has stagnated around $18 (E26.5, $32) for well over a year. But Icahn is not like most Time Warner investors.
He has threatened to increase his 2.9% stake in the huge US media company to give him more influence over the composition of the board, including a seat for himself.
After weeks of resisting him, Parsons gave in – somewhat. Last Wednesday he said Time Warner would increase its shares buyback plans from $5bn to $12.5bn of shares. Icahn had been demanding a buyback worth $20bn.
He argues that the company had a sufficiently strong cash flow and low enough debt to withstand the larger deal.
Parsons says he wasn’t influenced by Icahn in his decision to up the amount, but few accept that explanation. Shares gained 1.9% on the news, to close on Wednesday at $17.90. But they fell back to open at $17.66 on Friday.
Parsons dismissed Icahn as a short-term investor who is looking for a quick uplift in Time Warner’s shares that he would then immediately dump for a profit.
Icahn derided Parsons’s buyback plan as “baby steps”. He did not return calls seeking further comment, but is clearly not happy with Parsons’ decision.
The pressure on Parsons also led him to hint strongly in the past few weeks that he was willing to sell a sizeable stake in Time Warner’s America online unit AOL, which has been on a bit of a rebound.
Though it is still losing subscribers at a rate of 2m a year to a myriad of cheaper, broadband internet service providers flooding the market, it is still the largest ISP in the United States and delivers wads of cash to the parent company.
AOL’s rebirth has come with a new strategy to reinvent itself as an ad-rich portal to other content on the net, rather than the dial-up, all-inclusive service it had been.
AOL has moved to an all-internet platform and away from its own costly software. Subscribers no longer need the software, but can sign on using any browser, where they can view ads that brought in $1bn in revenue in the past year.
There was some surprise at the frenzy that ensued after it became known that a minority stake would be made available. Google, Microsoft and MSN became earlier suitors.
But Parsons last week tried to downplay the AOL talk. In a conference call with analysts, he said discussions were too fluid to know whether there would be a deal.
Parsons last week lost AOL’s founder and first chief executive Steve Case, who had remained on the Time Warner board after giving up the top job at AOL.
It was Case who with Jerry Levin of Time Warner engineered what has come to be known as the worst merger in Wall Street history.
In the heady days of the dot.com boom at the end of the millennium, it seemed like the perfect combination: Time Warner’s massive content library with AOL’s new-fangled distribution system over the net.
Case remains convinced that it was a good deal and that in time he will be shown to have been right.
Certainly the kind of convergence he envisioned is just now beginning to take shape, with cable television, internet, and telephone companies crossing over into each other’s businesses.
The busting of the tech bubble hit AOL-Time Warner hardest with more than $200bn of shareholder value wiped out. First the AOL moniker was jettisoned from the corporate name: now the founder has gone to develop his own business in the healthcare field.
Parsons’ buyback scheme and Case’s departure coincided last week with Time Warner’s third-quarter earnings results.
They showed an increase in revenue from $9.9bn a year earlier to $10.5bn this year. Net income rose 80%, from $499m to $897m. Even that performance won’t silence Icahn.