Time Warner chief Richard Parsons said the transfer of power to Jeffrey Bewkes is already under way, and said cable assets would be the only part of the media conglom to be spun off in the foreseeable future.
The comments, delivered at Goldman Sachs’ Communacopia media confab Tuesday, were the company’s first public response to a flurry of recent speculation from media and Wall Street. A research note (more like a rant) from Pali Capital’s Richard Greenfield was typical: “Would the actual strategy please stand up? Please ask Richard Parsons today,” Greenfield wrote.
Goldman Sachs’ Anthony Noto did, in a less confrontational way, as the moderator of the Parsons sesh.
“I used to run track, and I did relays,” Parsons said, by way of explanation. “Being CEO is like running a leg of this race. … The way to do it is not to surprise someone and show up and say, ‘Here. It’s yours.’ You have what’s called the passing lane. We’re in the passing lane right now.” Parsons dodged the issue of exactly when Bewkes would take the reins, saying it would be up to the company’s board.
Some have speculated the move could occur as early as January, even though Parsons’ contract runs through May. He is expected to remain as chairman.
The even-keeled Parsons still wins points from investors for bringing Time Warner back from the brink after the cataclysmic merger with AOL. Continuing the track metaphor, Parsons drew a big laugh from the crowd by recalling that during his early days in the top job, “I picked up the baton off the dirt and ran as fast as I could.”
Some have been betting recently that Bewkes’ ascension could hasten the breakup of the world’s largest media conglom. Pieces such as AOL, the Time Inc. publishing unit and cable TV have been mentioned as spinoff or sale candidates.
In 2005, when the company was engaged in an all-out battle — which Parsons termed a “kerfuffle” on Tuesday — with activist shareholder Carl Icahn, the breakup argument was that the share price would rise with a more defined value proposition. As currently constituted, Icahn and others said then and now, the company’s growth story is difficult to discern.
“At the time, I was unpersuaded, and the market was unpersuaded that that argument had any weight,” Parsons said. “But it may have more resonance now, and we are evaluating that argument again. One reason we haven’t jumped onto it is we’re just now in a zone where we can take a serious look at it.”
Cable, especially given the sudden rise of telephony and high-speed Internet service as revenue generators, is the most likely candidate for a spinoff. Time Warner Cable is already a separately traded stock 84% owned by the parent company.
Its results are hugely meaningful to Time Warner — about 26% of annual revenues, or $11.8 billion, come from cable.
Publishing, Parsons contended, is beginning to see bright horizons, thanks to online ad strength. The much-derided AOL is seen as a takeover target, with Yahoo and Microsoft potential suitors, but Parsons said the company was focusing on maximizing its profits as it transitions from a subscriber-based to an ad-based model.
Parsons dismissed “the notion that you could spin this out and create this magical currency just because, ‘Look what happened to cable!’ A lot of things are facile to say, but I don’t see the analytics.”