Time Warner CEO Parsons to resign
Head of the world's largest media conglomerate said he will step down as of Jan. 1; chief operating officer Jeffrey Bewkes will take over as CEO.
NEW YORK (CNNMoney.com) -- After a more than five-year stint running media conglomerate Time Warner, chairman and chief executive officer Richard Parsons announced Monday that he will resign as CEO as of Jan. 1, 2008.
The company said Parsons is turning over the CEO reins to Jeffrey Bewkes, currently the president and chief operating officer of Time Warner. Parsons will remain chairman.
The announcement has been long-expected as Parsons' contract with Time Warner expires in May 2008.
Time Warner (Charts, Fortune 500), in addition to being the parent company of CNN and CNNMoney.com, owns the Warner Bros. movie studio, Internet company AOL and a majority stake in Time Warner Cable (Charts).
"Jeff is the right person to be the next CEO of Time Warner, and I couldn't be more delighted that he will lead this company into the future," Parsons said in a statement. "Jeff is a well-respected business executive both inside and outside the company."
Bewkes will retain his title of president, the company added.
The handoff comes at a tense time for the large media company, whose stock, trading at about $18 a share, is roughly where it was when Parsons took over in May 2002.
Shares of Time Warner closed slightly lower Monday. The stock had gained as much as 3.2 percent earlier in the day as CNBC and The Wall Street Journal both reported that the news about Parsons was imminent.
One fund manager said the stock's slide may be due to the fact that the news was not a surprise to anyone.
"It was the poorest kept secret in media that this would happen, so this doesn't change our investment opinion about the company," said Virge Trotter, a senior analyst with Manning & Napier Advisors, a money management firm that owned about 9.6 million shares of Time Warner as of June 30.
But Trotter said Parsons deserves credit for selling off some of Time Warner's slower-growing divisions.
In 2003, Time Warner sold Warner Music Group (Charts), which is now an independent public company, to a group led by Edgar Bronfman Jr. and private equity firms. Last year, Time Warner Book Group was sold to French media firm Lagardere.
At the same time, Parsons successfully fended off calls to break up the sprawling media company. He also boosted the company's share buyback plan in response to pressure from activist shareholder Carl Icahn last year.
Still, some investors have argued that a split could boost the overall market value of Time Warner.
And it is not clear that Bewkes, who was named president and COO in 2005 after a long successful stretch at the HBO division, would be similarly resistant to a major restructuring.
On the table, some analysts have speculated, are the complete spinoff of the cable division, selling the Time Inc. publishing division, and either taking AOL public or combining it with one of its rivals.
To that end, Trotter said he would like to see Bewkes sell or spin off Time Warner Cable and AOL and hold onto the company's television networks, movie studio and magazine publishing divisions.
AOL has been playing catch-up to the likes of Google (Charts, Fortune 500) and Yahoo! (Charts, Fortune 500) in the lucrative online advertising market. And investors have grown concerned about slower subscriber growth in cable as companies like Time Warner Cable and Comcast (Charts) face increased competition from phone companies AT&T (Charts, Fortune 500) and Verizon (Charts, Fortune 500) as well as satellite television firms DirecTV (Charts, Fortune 500) and EchoStar Communications (Charts, Fortune 500).
"We consider Mr. Parsons' (largely expected) resignation a positive for the stock because his successor Jeff Bewkes will likely be more aggressive at restructuring the company," wrote Oppenheimer & Co. analyst Thomas Eagan in a report Wednesday. "We expect Mr. Bewkes will be less sentimental about selling or spinning off divisions, such as publishing, or reducing the current 84.5% stake in cable systems."
Under Bewkes' watch, the company has already publicly listed some shares in the cable division, sold off some magazines and revised AOL's business plan to focus more on Internet advertising and less on subscriptions for e-mail and Internet access.
"I welcome this opportunity to work with my colleagues and the board to lead this company successfully into the future. We have a lot to do, and I'm intensely focused on building shareholder value," Bewkes said in the company's statement.
According to a recent profile of Bewkes in Fortune, a sister publication of CNNMoney.com, Parsons and Bewkes have very different resumes as well as different management styles.
Parsons, a Brooklyn-bred lawyer whose career included stints working for the Rockefeller family and turning around New York's Dime Savings Bank, is known for his affability, diplomatic skills, and social interests (ranging from late-night Grammy parties to his vineyard in Tuscany), Fortune noted.
Bewkes, who grew up in New Jersey and Connecticut, is an alumnus of Deerfield Academy, Yale, and the Stanford Business School. He toyed with becoming a TV reporter and worked briefly in banking before joining HBO as a marketing manager in 1979.
Where Parsons can appear carefree in the middle of a typhoon, Fortune reported, the wire-thin Bewkes, who at 55 is four years Parsons' junior, can seem like a man on a mission who will get around to sleeping or eating next week.
He is, associates say, as relentlessly curious about the minutiae of finance or the HBO development slate as he is about adjusting drapes and lighting when he comes into a room. One person who knows both men well says Bewkes can have much sharper elbows than Parsons and can be a tough boss to please.
A spokesman for Time Warner said the company would have no further comment about Bewkes' promotion and any potential changes that may take place at the company once he takes over as CEO.
Time Warner will report its results for the third-quarter on Wednesday. So this will be investors' first opportunity to hear what Bewkes has to say about his future plans for the company. Bewkes is also scheduled to speak at a media conference in New York later Wednesday afternoon.
Martin Pyykkonen, an analyst with Global Crown Capital, also said he thinks Bewkes is more likely than Parsons would have been going forward to sell off more or even all of the cable business. He said the more critical question concerns what types of businesses Bewkes wants to bulk up, not what he's planning to shed.
"Cable is a great business from a cash flow standpoint, but Time Warner could sell it and invest more in digital media," Pyykkonen said. "The more important question that few are asking right now is what does Time Warner do with the money from any asset sales. The media world is in a state of flux."
Additional reporting from the Oct. 1, 2007, issue of Fortune: "For Time Warner, a time to break up?" by Richard Siklos and Stephanie N. Mehta