Parsons teases next chapter

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Time Warner might sell off AOL's domestic Internet access business to focus on online advertising, but more dramatic efforts called for by some on Wall Street aren't being considered in the near term, Richard Parsons said Tuesday.

Speaking at the Goldman Sachs Communacopia Conference in New York, the TW chairman and CEO also said that he's "in a transitional role" as leader of the world's largest media company, and that he's preparing to "pass the baton" to COO Jeffrey Bewkes.

Parsons drew laughs with his track-and-field metaphor when he described picking that baton up from the dirt, a reference to the poor shape the company was in when he became CEO in May 2002 after TW merged with AOL, just before a crash in Internet company valuations.

That Parsons intends on retiring soon and Bewkes is considered heir-apparent is not — as Parsons suggested to the investor gathering Tuesday — much of a secret. But Parsons is unusual because he doesn't shy away from talking about the fact that his CEO role is winding down and that he has other priorities to focus on.

Recently, for example, he drew criticism in some circles for telling the New York Times, "This is my job. It's not my life. I don't define myself by this."

Investors, though, might find that sort of candor more admirable if TW stock wasn't so lethargic.

Shares vaulted to more than $90 at the height of Internet mania on Wall Street, then sunk to less than $10. On Tuesday, shares were up 2.2% to $18.64, about where they traded in December 2004.

Some clamor for bold moves to juice the stock: spinning off Time Warner Cable, selling the publishing business, increasing the stock buyback from $5 billion to $20 billion, setting an initial public offering of AOL. Parsons beat back those expectations during Tuesday's conference.

The CEO said he will "look hard," however, at selling AOL's access business in the U.S. during the next 12-18 months, much like what occurred last year in Europe. That move put about $2 billion in TW's coffers.

Like Parsons, AOL is in a transition mode, trying to become an online-ad powerhouse even though the bulk of its profit comes from the access side of the business.

"AOL can be a growth driver because it's playing in a space where the tide is definitely coming in," Parsons said.

PricewaterhouseCoopers estimates that U.S. online advertising will grow 16% annually into a $35 billion business by 2011.

As for publishing, Parsons said it is growing again as sluggishness in physical print is offset by surging online revenue associated with TW's stable of magazine titles.

He said a spinoff of the cable business might come "in the fullness of time," but, as is the case with AOL's ad business, synergies still exist between cable and the rest of TW and value isn't necessarily created simply by separation.

Parsons also said that he is bullish on the movie business as the "digital revolution hits that space," including cost savings from digital distribution and better margins associated with VOD compared with DVD.
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