By late August, Gordon Crawford, one of the media world's savviest investors, had had enough. As the chief media stockpicker for Los Angeles-based money-management firm Capital Research & Management Co., Crawford had watched Capital's stake in AOL Time Warner Inc. (AOL ) lose $500 million in value in a single month. That was on top of the $7 billion that went poof the previous year.
Now AOL shares were getting slammed yet again over alleged accounting irregularities at its America Online Inc. unit. In a New York meeting with AOL Chairman Stephen M. Case, Crawford's message was blunt: Resign. Of course, Case has resisted--so far, anyway. An AOL Time Warner spokesman declined to comment on the meeting. "Case is hated in his own company by executives whose stock options have lost fortunes," says a source with knowledge of the meeting. "Gordie felt AOL won't turn around until he's gone."
No doubt about it--Crawford, whose moves in and out of media stocks have been widely watched and emulated for three decades, has been throwing his weight around. The boyish-looking 55-year-old is usually reserved and low-key, with a penchant for dissecting complex financial documents. But having invested billions in the sector--holding stakes as large as 6% of shares outstanding in such giants as AOL, Viacom (VIA ), and News Corp. (NWS )--Crawford is struggling with the worst slump in media stocks in a decade (table). His five largest holdings have lost more than $10 billion in value since June, 2001, according to filings.
Management crises are compounding the problems. That has prompted Crawford to take action against AOL, Walt Disney Co. (DIS ), and others. "Gordie is not a confrontational guy," says media investor and former Viacom President Frank J. Biondi Jr., "but he's watching his holdings crater, and frankly, he's getting a little ticked." Crawford declined to comment for this story.
Even before unloading on Case, Crawford had been flexing more muscle across his portfolio. In June, he urged scandal-ridden Adelphia Communications Corp. to install as its new CEO former cable-TV operator Leonard Tow, a large Adelphia investor. That was after Adelphia revealed accounting irregularities that eventually led to the indictment of three members of the founding Rigas family. At the time, Capital owned 4.8% of Adelphia and faced losing its entire $160 million investment as the company lurched toward bankruptcy. Crawford's camp lost out when Adelphia named board member Erland E. Kailbourne, a boyhood friend of Rigas patriarch John Rigas, as CEO. Adelphia officials declined to comment.
As with most money managers, Crawford's ultimate weapon is to dump his shares. That's exactly what he did last year as problems began to mount at Disney and Crawford became disenchanted with CEO Michael D. Eisner's leadership. Crawford liquidated Capital's entire Disney holdings, selling nearly 66 million shares that had been worth $1.9 billion in early 2001. That sent shockwaves through the investor community and prompted other large investors to lessen their positions, exacerbating Disney's stock woes. "Gordie thinks Michael has to go," says a source close to the money manager. "He's voting with his feet." Crawford's moves so unnerved Disney execs that he had to assure them in a recent call that he wasn't involved with dissident Disney board member Stanley P. Gold in any sort of coup to oust Eisner.
Such hard-edged tactics are unusual for Crawford, who has mostly spent his 31 years at Capital nurturing his ties to media brass. A regular at investment banker Herbert Allen's annual Sun Valley (Idaho) mogulfest, Crawford plays golf with Yahoo! Inc. (YHOO ) Chairman Terry S. Semel and counts Barry Diller and John C. Malone among his close friends. Ted Turner is a fly-fishing partner, and Crawford was among the confidants who encouraged Turner to sell his company to Time Warner in 1996. Today, Turner, the largest individual AOL shareholder, is waging his own battle inside the AOL boardroom to oust Case, winning allies such as director and Hilton Hotels CEO Stephen F. Bollenbach, say sources. "Having Gordie take the lead is forcing other large investors to make the same calls to Case," says a Crawford associate.
Some of those other large investors keep a close eye on Crawford because of his strong industry connections and enviable track record. "He's a great sounding board," says former Seagram Co. Chairman Edgar Bronfman Jr., who sought Crawford's counsel after buying Universal Pictures in 1995. "He's a straight shooter, honest, and he knows everything that is going on in media." The son of the chairman of Bowery Savings Bank, native New Yorker Crawford earned his MBA from the University of Virginia. He was among the first to realize the money that could be made from licensing old movies and TV shows, making a large killing after investing in library-rich MCA in the mid-1970s. He amassed large stakes in cable companies in the '70s, when broadcasters first started losing viewers to cable operators like Tele-Communications Inc. and Comcast Corp. (CMCSK ), but got out of many of them late last year as satellite TV began to siphon off cable customers. (He still holds 28.5 million Comcast shares).
Crawford's clout is unusual in money-management circles. He runs only 2 of the 29 funds in Capital's American Funds Group but serves as media analyst and helps on investment decisions for others. With media stocks hit hard this year by slow ad sales and other problems, four of the five American funds with large media holdings have fallen behind peers, according to mutual-fund rater Lipper Analytical Services Inc.
No wonder Crawford has been antsy. But this is just his latest round of activism. In 1995, he refused to vote Capital's shares in favor of CBS Chairman Laurence A. Tisch's slate of directors. After that bruising fight, Tisch sold the network to Westinghouse Corp. In 1996, Crawford blasted Cablevision Systems Corp. (CVC ) for buying Madison Square Garden and Radio City Music Hall, assets he feared would divert the Long Island company from its core business.
Pushing Case to leave AOL won't likely be as simple. Crawford bought up more AOL shares in July, just before the accounting problems surfaced. His total is now over 200 million shares, too many to quickly liquidate Capital's position. So Crawford is keeping the pressure on Case to bow out on the grounds that he no longer inspires the troops--himself included.
By Ronald Grover in Los Angeles