Parsons: Time Warner should keep AOL
Copyright 2005 Cable News NetworkAll Rights ReservedCNNMoney.comSeptember 21, 2005 Wednesday 9:27 AM ESTFrom Lexis Nexis
Time Warner Inc. Chairman and CEO Richard Parsons said Wednesday he believes the company should hang onto its cable and America Online units, amid calls by investors for a sale of cable and news reports that it's looking to sell a stake in the Internet company.
Financier Carl Icahn, leader of a group of investors who own about 2.6 percent of the company's stock, is pushing for Time Warner to sell all of its cable business, the second largest in the industry. And reports last week suggested that Time Warner is in discussions to sell at least a stake in its America Online unit to Microsoft to create a joint venture with the software company.
Speaking at a Goldman Sachs investors conference, Parsons said he wouldn't comment on the Microsoft stories, but he suggested that Time Warner is not about to drop the world's largest Internet service provider at this point, almost four years after it became part of the world's largest media conglomerate.
He said he believes that the company's plans for AOL to move it away from a subscriber-based service to a more advertising-based business model should lead to it being more fairly valued by investors.
"The real driver of enhanced valuation is going to be AOL in the near term and the long term," said Parsons.
Parsons said he is open to owning less than the 84 percent stake in Time Warner Cable that the company expects to own after a purchase of assets from the bankrupt Adelphia Communications is complete. But he said he thinks it's important that Time Warner retain a large stake in cable operations to protect its movie studios and television networks.
"Content may be king, but distribution is the power behind the throne," he said, quoting a statement told to him by his much-maligned predecessor as CEO, Gerald Levin.
Parsons said management is considering Icahn's proposals for a sale of the cable business as well as for a $20 billion share buyback, rather than the $5 billion buyback planned by the company.
"Right now I believe cable is still a strategically important asset for us," he said. "I also happen to be a big bull on cable business. I do not think this is time to cast it off. Could that change over time? We'll see."
Parsons seemed to be most open to the proposal of a larger share buyback, although he wouldn't commit to that.
"It's a balancing act," he said, talking about the company's balance sheet, which would likely have to carry a larger debt load if it bought back more shares. "How do we get to a place where we're not over-leveraged and we haven't put ourselves in handcuffs?"
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