Time Warner Confirms Parsons Stepping Down
Time Warnerconfirmed a CNBC report that Dick Parsons is stepping down as CEO and will be replaced by Chief Operating Officer Jeff Bewkes.
Parsons said he is giving up his post Dec. 31 but will remain as chairman of the board. There was no timetable set for how long he will stay in that position.
Bewkes, identified as the heir apparent since 2005, will take over the CEO job on Jan. 1.
"Today's decision is the culmination of a thoughtful and disciplined process that began in early 2006, when Dick Parsons initially approached the Board to discuss the timetable for the CEO succession," said Robert C. Clark, chairman of Times Warner's Nominating and Governance Committee. "The Board is delighted that Jeff Bewkes will be the next CEO and that Dick Parsons will continue to serve as Chairman of the Board."
The move comes at a time when investors are demanding Time Warner take drastic measures to boost its sluggish stock price, which has fallen back to approximately the same levels as when Parsons took over the company five years ago.
"I don't think there will be immediate impact to operations, although I do think that Jeff is less sentimental about the current structure of the company," Oppenheimer analyst Thomas Eagan said. "Whether that means he is more willing to spin off or sell publishing, for example, I think it means that he will be more driven by the results than by strategy."
Parsons' contract officially ends in May 2008. He took over the company in 2002 after a difficult merger with America Online and has been credited with improving the company's operations across its portfolio of movies, cable television and cable services companies.
His departure ahead of the contract's expiration and speculation that he would retain the chairman role, has been long rumored.
Parsons expressed cofidence in Bewkes' ability to lead the company and pledged his full support.
Bewkes, who also serves as president of the company, was identified close to two years ago as the leading candidate to take over as CEO upon Parsons's exit. Some investors said they believed tough decisions on spinning off or selling off divisions, including AOL, would more likely to be made by Bewkes.
Spinning off various divisions of the company was at the heart of the company's confrontation with activist investor Carl Icahn two years ago. As part of that fight, Lazard Frères, at the behest of Icahn, authored a report laying out a breakout plan likely to bring immediate gains for shareholders. Lately that plan, while rebuffed at the time of the conflict with Icahn, has been gaining traction within the company. (Click here for details).
That plan included a spin-off of its majority ownership in Time Warner Cable . The Lazard outline also raised the possibility of selling off its publishing unit, Time Inc., as well as the AOL unit.
Some investors say that Bewkes, who had been an outspoken critic of the AOL-Time Warner merger, should seriously consider spinning off part or all of the Internet division, or sell off another stake in Time Warner Cable.
The once-mighty AOL online service has struggled to keep up with faster-moving Google and Yahoo in recent years, and Time Warner is expected to show another slow quarter of AOL advertising sales when it reports financial results on Wednesday.
Gamco Investors's Mario Gabelli, a Time Warner shareholder, expects Bewkes to look at strategy changes, such as a partnership between AOL and Yahoo. He is in favor of the company retaining a major interest in the Internet unit.
"Clearly, something will occur," Gabelli told Reuters last week, ahead of the widely expected announcement. "New CEOs all do something new in the first couple of years."
For its part, Time Warner management has said the company has explored a wide range of potential options, including spinning off the 84 percent-owned cable division completely.
An HBO Veteran
Bewkes, 55, joined HBO in 1979 when cable television was still in its infancy. He rose through the ranks and was named HBO's CEO by 1995, building the network from a second-run movie outlet into a developer of critically acclaimed original TV series such as "The Sopranos" and "Sex and the City."
Analysts say Bewkes, who graduated from Yale and has an MBA from Stanford, combines financial savvy with a knack for managing creative talent.
Oppenheimer's Eagan said Bewkes is results-driven and will look closely at the financials of Time Warner's publishing and Internet units before taking any action.
As for Parsons, 59, he has been praised for taming warring factions at the company after its disastrous $106 billion merger with AOL, which had ignited a spate of government investigations and a free-falling stock price.
The former lawyer's calm demeanor brought stability to Time Warner, though more recently, critics say he has not been fast enough in chartering a new strategy for the conglomerate.
Time Warner's stock is down about 18 percent this year, underperforming rivals such as News Corp and Walt Disney Media reports of Parson's imminent departure boosted the stock nearly 4 percent on Oct 26.
"I think that Dick Parsons was certainly the right guy to bring the company through the AOL merger, to keep the businesses intact," Eagan said. "Technology is changing things faster today than it was back then. So whether it's how best to distribute their video content ... all those questions Jeff will more likely be able to capitalize on."
-- Reuters wire service contributed to this report.