TW shops plans to Street

Parsons looks for acquisitions to boost conglom

This article was updated at 5:36 p.m.

If you’ve got a company to sell — call Richard Parsons at Time Warner.

The chairman of the newly nimble conglom is trumpeting his acquisitive intentions loudly after a period of turmoil and rapid-fire asset sales at the world’s biggest media concern. “We’re going to start looking outside for assets that will enhance the company. We will be patient and opportunistic, but we will clearly have a different focus going forward than we have had in the past 18 months,” he said Tuesday.

Cable systems top his wish list, followed by acquisitions in TV networks, film and publishing — “in other words, the businesses we’re already in, we like … (and) we understand,” Parsons told investors at the Smith Barney Citigroup media and entertainment conference in Phoenix.

The Time Warner CEO is “warming up the Street so no one’s shocked. He’s sending the message the company is back. And he’s telling people to start calling him if they have anything to sell,” said showbiz analyst John Tinker of Blaylock & Partners.

“It’s a complicated company to follow, and you can’t be too nuanced in your message. It’s not like the old days when they whispered to a few analysts,” he added.

Battling DirecTV

Bulking up in cable is key, as operators need muscle, deep pockets and new services to compete with a satellite biz governed by Rupert Murdoch’s News Corp., the new parent of DirecTV. Time Warner Cable will start offering telephone service in most of its markets this year to keep subscribers hooked up.

Pressure may push small cablers to join forces in a round of mergers, or to call on Big Daddy, Time Warner. “We are believers in cable, believers the industry will continue to consolidate. And we’d like to participate in that consolidation for the right price,” Parsons said.

He acknowledged, “Choosing where to invest may be harder than deciding which assets to divest.”

Stopping the music

Time Warner most recently unloaded its Time-Life direct marketing group, Warner Music and its half of Comedy Central. Parsons defended his decision to sell music, a business he’s fond of but that’s unlikely to see high-growth, high-return mode for years. He said film piracy is a major challenge but the threat can’t be compared with the effect it’s had on music. “Broadband is not here and available to the extent that what happened to music can happen to movies,” he said.

“In the history of the world, at the end of the day, the pirate never wins,” he said. “We’re organized, we’re capitalized, we’re legitimate, we’re committed.”

One of the conglom’s last assets for sale may be stumbling AOL Latin America, Parsons indicated. But he was upbeat at the prospects of parent America Online for this year. AOL will finally boost its operating income in 2004. But the stronger numbers will be driven largely by cost cuts, which means the division’s future perf, beyond this year, still remains uncertain.

Brass ‘Rings’

The ad market is up in TV, but not at the Time Inc. magazine unit. Filmed entertainment is rocking as “The Lord of the Rings: The Return of the King” dominates the box office. “The trilogy is complete, and the bet that New Line made in producing all three at once has generated a cultural phenomenon and a financial grand slam,” Parsons said.

This year, Warner will roll out “Harry Potter and the Prisoner of Azkaban,” “Catwoman” with Halle Berry, “The Phantom of the Opera,” “Polar Express” and sequels to “Scooby-Doo” and “Ocean’s Eleven.”

Overall, Parsons said, the conglom’s finances, internal morale and investor confidence are much improved. The stock, which has risen above $18, reflects that.

Having slashed Time Warner’s debt by essentially $10 billion in the past year, Parsons assured investors that contrary to some news reports, the company has no obligation to muddy the balance sheet by paying Comcast billions of dollars in cash to unwind the partnership in Time Warner Cable.

Comcast rumblings

Comcast wants to unload its minority TWC stake and has forced Time Warner to formally register the shares for sale under the terms of an agreement between the two companies. Parsons said Tuesday the registration is about all Time Warner is required to do. Relations are “good” and talks are ongoing, he said.

“They have issued a demand that we file the stock to issue it to the public. The extent of our effort is to make a reasonable effort to get that done. It’s not true that there’s a ‘put,’ that we have to purchase it if that can’t get done,” he said, referring to Comcast’s 18% stake in Time Warner Cable. Initially, the idea had been for Comcast to cash out its stake through an initial public offering of TWC.

Investigator’s eye

But an IPO was stalled due to regulators’ probes of Time Warner, which began saying publicly some months ago it had no desire to launch an IPO in any case. While Comcast’s insistence on a registration is seen by Wall Street as more of a nudge than a declaration of war, the issue is clearly dicey.

The FCC and Dept. of Justice investigations, which started with a look at AOL’s fuzzy accounting, have been ongoing for more than a year. Regulators “are understandably very protective of their own prerogatives,” Parsons said with a hint of frustration. “They are moving at their own pace, continuing to investigate the things they’ve been looking at for some time. We continue to cooperate with them to the maximum extent we can.” He recognized the inquiry is a cloud on the stock and absorbs time and resources. It is “not related to anything we do and has no constructive or productive potential.”

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