Parsons tells investors AOL unit sale possible

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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, CEO Richard Parsons said Tuesday.

Speaking at a Goldman Sachs conference in New York, Parsons also said 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 said he had to pick that baton up from the dirt, a reference to the poor shape the company was in when he became CEO in May 2002 after Time Warner merged with AOL, just prior to a crash in Internet company valuations.

That Parsons intends on retiring soon and Bewkes is considered heir apparent is not -- as Parsons said Monday -- much of a secret, though Parsons is unusual in that he doesn't shy away from talking about the fact that his CEO role is winding down and he has other priorities to think about.

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 Time Warner 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.

While some clamor for bold moves to juice the stock, like a spinning off Time Warner Cable, selling the publishing business, increasing the stock buyback to $20 billion from $5 billion now and offering an initial public offering of AOL, Parsons beat back those expectations during Tuesday's Goldman Sachs Communicopia conference.

He did, though, say that he'll "look hard" at selling AOL's access business in the U.S. over the next 12-18 months much like it did in Europe last year, a move that put about $2 billion in Time Warner's coffers.

Like Parsons, AOL is in transition mode, trying to become an online advertising 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 16.1% annually into a $35.4 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 Time Warner's enviable 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 advertising business, synergies still exist between cable and the rest of Time Warner and value isn't necessarily created simply by separation.

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