Financier Carl Icahn stepped up his campaign against Time Warner Inc, releasing the results of a study proposing that the media conglomerate be broken up into four companies.
The report released on Tuesday, and which Icahn commissioned from the boutique investment bank Lazard Ltd, also found that Time Warner's excessive focus on short-term considerations has cost shareholders US$40 billion.
"Time has not been friendly to Time Warner," Bruce Wasserstein, the head of Lazard, told a news conference in New York, adding that the need for changes there was "urgent."
Wasserstein found particular fault with the company's handling of AOL, saying it should have moved sooner into Internet-based telephone services; waited too long to offer a bundled service with corporate sibling Time Warner Cable; and not didn't capitalize on the surge in Internet advertising.
"Since 2002, almost every strategic decision concerning AOL has been wrong," Wasserstein said. "Time Warner failed to nurture or invest in AOL."
Time Warner's deal in 2000 to be acquired by AOL led to enormous problems, including a plummeting share price, a management purge, failure to deliver on promises of corporate synergy and accounting improprieties at AOL. The combined company used to be called AOL Time Warner Inc.
Time Warner has since shed debt, settled shareholder lawsuits and regulatory investigations and revamped AOL's business strategy to attract more advertising.
Despite those efforts, however, Time Warner' stock has remained in a rut, something that Time Warner Chief Executive Dick Parsons and Icahn agree on. The stock is still roughly at the same level it was in the spring of 2002.
Time Warner promised to evaluate the proposals in Lazard's report, which runs more than 300 pages, and to say more on the subject later. In the meantime, the company said: "We are on the right path. The company is delivering."
The new proposals go further than Icahn's previously stated plans for Time Warner, which included a US$20 billion share-buyback program and a spinoff of the cable TV business.
The Lazard report, which Icahn will use as a basis to continue his campaign to install a new slate of directors, recommends an even more radical restructuring of the company, breaking it up into four units: AOL, publishing, cable and entertainment.
Icahn also recruited Frank Biondi, a former head of Time Warner unit HBO and Viacom Inc, to serve as chief executive of Time Warner if Icahn's drive to install a new slate of directors succeeds, which is far from certain.
In a somewhat puzzling twist to the story, Biondi told the news conference that he hoped Jeff Bewkes, who is currently Parson's No. 2 executive, would stay on board. Icahn has been very critical of Time Warner's current management, which would presumably also include Bewkes.
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