Parsons closer to his Time out
Exec's speech outlines pre-exit goalsTime Warner Inc. chief Richard Parsons on Thursday signaled more clearly than ever that he will drop at least his CEO title in the next year or two and again backed president and COO Jeffrey Bewkes as his heir apparent.
With the chairman and CEO's contract up in May, industry insiders have been wondering whether Parsons will stay around much longer. Speaking at a Merrill Lynch media investor conference Thursday in London, the executive said he would like to accomplish three things before leaving: making sure AOL has found its place and is on a sustainable growth track, finishing TWC's integration of Adelphia assets and making sure the cable unit fires on all cylinders as well as ensuring that Time Inc. is "well on the road to (its) digital transition."
Parsons, who took the reins at TW in 2002, added that the goals should be taken care of in a year or two, saying TW will be "left in good hands" once he departs. Bewkes "is the right man" to lead TW in the future, he said, though he emphasized that the company's board must make the final decision. Parsons didn't specify if he would stay around as chairman for a while after handing over the day-to-day CEO duties.
Parsons also noted that TW expects to be in a position to make a decision on the future of its AOL unit by year's end and that it could sever its ties to majority-owned Time Warner Cable in about five years or so, even though no such decision has been made.
Parsons also shot down continued Wall Street talk about a sale of the Time Inc. magazine unit, signaled that the TW board likely will vote for a new stock-buyback program and promised that the company's dividend would grow "modestly but predictably" over time. His comments were webcast.
Asked about the much-debated issue of offering movies on cable operators' VOD platforms day-and-date with DVD releases, Parsons echoed the enthusiasm of executives at TW's Warner Bros. studio this week (HR 6/5).
He said that at least some films have seen four to six times their normal buy rates on VOD in day-and-date trials. Warner Bros. Home Entertainment Group president Kevin Tsujihara said Monday that buy rates were up 50% in trials across all studios.
Parsons also expressed confidence that downloading of films will become an attractive business over time and "expand the market" for studios rather than cannibalize it. He drew laughs when he said it would be a cold day in hell before he would go to a movie-rental store and added that he has never been to a Wal-Mart.
Asked about possible acquisitions as another use of cash, the TW boss said after paring down its asset portfolio the industry giant is now looking "to go back on the offensive." Deals are most likely to come in the online advertising and cable fields as well as other core businesses if a high return is possible, he said.
"We are not looking now to go outside" core businesses, Parsons said.
Asked about AOL, Parsons lauded its progress to date after changing strategy but said more time is needed for management to fully evaluate the success of its focus on growing online audiences and advertising.
"By the end of this year we can make the call on AOL (on whether) we have found a business model or approach that can result in sustainable growth over time," he told conference attendees.
Wall Street has long suggested that TW could sell or spin off AOL or a part of it. Some have suggested AOL separate its Internet access business from its other activities. However, so far no one has offered the real value for AOL or certain parts of it, and management has no plans for any dealmaking, he said.
TW sold a 5% stake in AOL, valued at $1 billion, to Internet bellwether Google Inc. in late 2005 in a broader deal that allowed AOL to use Google search technology.
Asked about TWC, Parsons again emphasized that TW could reduce its 84% stake over time as it acquires other cable operators. He predicted that cable consolidation activity could be spurned in about 18-24 months. Cablevision Systems and privately held Insight Communications are regularly cited by Wall Street observers as possible takeover targets.
"Eventually, five years down the road, it's conceivable. … There could come a point in time when there's two separate stand-alone companies," Parsons said about TW and TWC. "I'm not prepared to make that call yet."
He dismissed market talk of a sale of Time Inc., saying management is "not looking" to divest or shut down some more unprofitable titles. "Magazines will be around for a long time," Parsons predicted, adding that the successful transition into the digital world is key.