Time And Warner May Now Become Time Warner

Wendy Cole remembers her shock at getting a phone call in early February from Gerald M. Levin. The vice-chairman of Time Warner Inc. was calling Cole, a reporter at Time magazine, to compliment her on a documentary film she had directed. Cole had sent Levin a copy of the film to demonstrate that Time's print journalists were developing their talents in electronic media as well. "It's really surprising he called," says Cole.

That's putting it mildly. Even as he chatted with Cole, Levin was enmeshed in a grim struggle for control of the world's largest communications company. On Feb. 20, after days of frantic maneuvering, Time Warner named Levin president and co-chief executive officer, replacing Nicholas J. Nicholas Jr. Time Warner executives and directors say Nicholas, whose contract called for him to become sole CEO in 1994, was ousted after clashing with the company's ailing co-CEO, Steven J. Ross.

Those who know him well say it's no surprise Levin could shift gears from boardroom intrigue to lauding the work of a junior staffer. Colleagues say the 52-year-old executive drew Ross to his side and vanquished rival Nicholas because of his ability to move deftly between roles: media executive, strategist, dealmaker, cheerleader. Most important, in stark contrast to Nicholas, Levin successfully spanned the distinct corporate cultures of Time and Warner. "He's the bridge between the two," says Felix G. Rohatyn, who advised Time Warner on its recent alliance with Japan's Toshiba Corp. and C. Itoh & Co.

A TECHIE. Now, with Ross battling prostate cancer, media and entertainment mavens on both coasts are debating what imprint this brainy, low-key executive will put on Time Warner. Levin declined requests for an interview. But several executives say his penchant for technology will push Time Warner further into such ventures as the 150-channel fiber-optic cable network it is installing in New York City. At Time Inc., where he always worked on the video side, Levin made his name as the builder of Home Box Office Inc.

Yet several executives say Levin's diplomatic style may also boost sagging morale among the company's publishing employees. Board member Henry Luce III opposed forcing out Nicholas. But he nevertheless supported Levin, in part because of his Time pedigree. Says Luce: "Jerry is a Time Inc. man, and I would hope he reflects that."

Editorial staffers think he does--far more than Nicholas did. In a welcome gesture, Levin recently told Time Warner's magazine publishers he would put the company's Time Inc. title back on its magazine and book-publishing unit. It had been changed to Time Warner Publishing. "This move is a real shot in the arm," says Publishing Chairman Reginald K. Brack Jr. Adds a senior Time correspondent: "He's been a better advocate for the editorial side than Editor-in-Chief Jason McManus."

Home Box Office will also have a strong champion in Levin. HBO has been struggling with the pay-cable industry's slowing rate of growth in recent years. But with Levin's enthusiastic backing, HBO Chairman Michael J. Fuchs is expanding into South America and Asia.

If Fuchs welcomes Levin's active support, Warner's entertainment moguls like that he stays out of their way. Nicholas once suggested selling the record division. But Levin gives free rein to Warner Music Chairman Robert J. Morgado. With stars such as Natalie Cole, Warner swept 10 of 12 major categories at the Grammy Awards on Feb. 25. And Levin will keep his hands off Warner Brothers Inc., the movie studio, which is hoping for a big '92 with films such as Batman Returns and Mambo Kings.

The stiffest test of Levin's dexterity will be Time Warner's complex finances. The company generated $2.26 billion in cash flow in 1991, on revenues of $12 billion. Christopher Dixon, a media analyst at PaineWebber Inc., predicts its cash flow will increase 8% in 1992. The debt-burdened company has breathed easier since it raised $2.7 billion through a stock offering and $1 billion more by selling a 12.5% stake in its entertainment assets to Toshiba and C. Itoh. And shareholders expect Levin to raise cash through another alliance, perhaps with France's Canal Plus.

But Time Warner still has $8.7 billion in debt to service. Levin will take Nicholas' place in talks with bankers over stretching out Time Warner's debt in exchange for higher rates. The bankers say they're comfortable with Levin and the company hopes to come to terms with them by this year's third quarter.

Easily Levin's biggest headache is dealing with the persistent rumors about Ross himself. Time Warner says he is responding to treatment, which sources close to the 64-year-old Ross say includes chemotherapy. But there's some question about the true nature of his condition. Cancer specialists say chemotherapy is a highly unusual treatment for a cancer that is limited to the prostate. And one major shareholder says the timing of the shakeup was prompted by fears about Ross's health.

Whatever Ross's prognosis, Levin seems destined to have full control over Time Warner. But Ross can rest easy knowing that with Levin's devotion to technology and the power of video, the new Time Warner will look a lot like the company Ross has been dreaming of.