Bewkes: New course for Time Warner ship


UPDATED 9:22 p.m. PT Nov. 5, 2007

NEW YORK -- It's official: Jeffrey Bewkes will replace his mentor Richard Parsons as CEO of Time Warner on Jan. 1 after a board vote Monday, and the conglomerate's businesses and corporate strategy are in for a change.

The two execs have largely functioned as yin and yang, with Parsons the avuncular diplomat with an easy laugh and Bewkes the hard-driven, bottom-line enforcer with a penetrating gaze.

"Jeff is the right person to be the next CEO of Time Warner, and I couldn't be more delighted that he will lead this company into the future," said Parsons, 59, who will remain chairman. Bewkes, 55, will keep his president title while dropping the COO portion.

The former chairman and CEO of HBO becomes yet another TV exec to lead an entertainment giant, joining CBS Corp.'s Leslie Moonves, Disney's Robert Iger and NBC Universal's Jeff Zucker.

Although Parsons is lauded for having helped overcome the divisiveness of the post-AOL-TW merger years, the company now is seen in need of a transformation that can boost the stock price and investor confidence longer term.

"The company has been strategically and competitively drifting," Omega Advisors portfolio manager Paul Kim said.

There likely will be a more focused pitch from Bewkes to Wall Street, where TW shares have been languishing. Less patient with underperforming assets, Bewkes might consider more asset sales and spinoffs than Parsons hasn't eyed, with AOL, TW Cable and Time on the shortlist of divisions that could be sold or restructured.

Hal Vogel, president of Vogel Capital Management, echoed that Parsons was the right man to right the ship after the AOL-TW merger. "But going forward, someone like Bewkes might be more suitable, and I think Dick Parsons recognizes this," he said.

Bewkes clearly signaled that he will focus on pleasing investors. "We have a lot to do, and I'm intensely focused on building shareholder value," he said.

Industry insiders said Bewkes puts excellence of execution and pragmatism over big visions.

Bruce Wasserstein, CEO of investment bank Lazard, recently called him "a highly regarded management kind of guy."

Bewkes is expected to run a decentralized TW where unit heads cooperate at times but largely compete with one another and their competitors.

Importantly, Bewkes combines business skills with creative savvy, positioning him well to attract Hollywood talent.

"He is generally well liked on the Street and in Hollywood as he is known for having a good mix of business and creative thinking," Miller Tabak analyst David Joyce said. "That is a potent mix that is, unfortunately, not always present."

As for his personality, Bewkes is known for being direct, even blunt when it comes to doing business, potentially making him harder to please than the teddy bear Parsons. And though he prefers to tread more carefully in front of reporters, Bewkes has made his business views clear in public appearances. In one comment, he told the Wall Street Journal that talk about synergy within TW is nothing more than "bullshit."

"Bewkes seems to be levelheaded and likely to change the configuration of all the TW pieces from where they sit now," Vogel said. "I wouldn't be surprised by further divestitures and rearrangements."

Banc of America Securities analyst Jonathan Jacoby said that he believes that "the cable separation is a fait accompli, as cable requires different capital requirements than traditional content businesses." Moves toward a full separation could come in 2008, he added.

Jacoby also suggested that TW "may seek to IPO AOL or attempt to use AOL as currency in a transaction to build a larger Internet platform, but it may also perhaps decide to maintain ownership and control of the AOL asset," especially if its ad-focused business model ends up working.

The analyst previously predicted that Time would be spun off during the next 18-24 months, but he has since been less sure. "The determining factor will be the publishing segment's ability to develop and demonstrate a path to monetization of an online strategy," he now predicts. The man who looks set to become Bewkes' CFO -- once longtime CFO Wayne Pace retires -- is John Martin, a former cable analyst who has good Wall Street connections and has successfully overseen TWC's finances. He would fit the profile of a CFO who could play a more active role in courting Wall Street.

Bewkes as CEO might not designate a second-in-command but lean on Martin and the heads of his units, who would continue to report to him. Bewkes already has been pushing through key personnel choices as Parsons has started taking a less active role and letting his president run the TW ship day-to-day.

However, a potential weakness of Bewkes is his perceived lack of an articulated vision.

"The challenge for Mr. Bewkes is to create a vision and decisively execute on it and not pursue a safe and incremental approach," Omega's Kim said. "This requires a visionary, not a manager. I don't think Bewkes falls under the visionary camp."

But he adds that Bewkes could end up surprising industry watchers in much the same way Iger did.

"There was mass skepticism when Bob Iger took over Disney, and the majority of observers believed that he was not up to the task," Kim said. "But he took decisive steps to recast the company under his personality -- disbanding the strategic group and decentralizing management -- and execute on relatively significant strategic maneuvers such as the Pixar acquisition and the resultant closer relationship with Steve Jobs."

While this might not have radically changed Disney, it has boosted the entertainment giant's standing on Wall Street, which many hope Bewkes can do for TW.