After Icahn's Exit
In his four years as head of the world's largest media company, Time Warner Inc. (TWX ) Chairman and CEO Richard D. Parsons has faced one crisis after another. His latest management win: reaching a settlement with formidable billionaire investor Carl Icahn, who for months vowed to oust Parsons and the rest of the Time Warner board and break the company apart. Still, Parsons' biggest challenge remains boosting the share price, which has been stagnant for three years, at around $17. In his first extensive interview since the Icahn deal, Parsons spoke with BusinessWeek Editor-in-Chief Stephen J. Adler about his battle with the former corporate raider, the plight of his share-
holders, and a career beyond Time Warner. The two sat down on Mar. 9 as part of the Captains of Industry series at the 92nd Street Y in Manhattan. Edited excerpts from their conversation follow:
Do you come out of your battle with Icahn a winner or a loser?
We come out of it in a good place for the company. In terms of so-called concessions to Mr. Icahn, we didn't really do anything that we weren't prepared to do in the best interests of shareholders. He and I agreed on one thing from Day One: that the company is undervalued. [But] I don't want to suggest Carl didn't have any impact on our thinking, because he did. He got us to focus in a more intense way on what we, and our shareholders, are interested in.
Just how distracting was Icahn to you?
[His campaign] got to be more of a distraction than was useful, that's for sure, because it was such sport in the newspapers. Before we finally decided everybody should put down their war clubs and resolve this thing, it was taking up 30% to 40% of my time.
What do you say to long-term shareholders who saw their stock go up to nearly $100 in the late 1990s, down to the $50 range at the time of the AOL deal, and now see it stuck at about $17 -- how do you frame that for shareholders?
[Those] who took the ride don't need me to frame it for them. They are pretty plugged in to their own experience. Nothing you can do, or I can do, can change that. We all suffered. The issue is where do we go from here. How do we build the value back? How do we re-create not only the reputation but the excitement that was here?
Wouldn't it be comforting for people at this point to hear you say the AOL merger was not the right thing to do, that it was a mistake?
Well, what I have said in the past, and what I say now, is clearly the timing was inopportune. If you want me to say the timing was a mistake, I'll give you that.
What is the significance of Google (GOOG ) purchasing a 5% stake for $1 billion in America Online?
We will be able to leverage more of Google's technology on the AOL platform. And we want to deepen our partnership with Google on certain kinds of advertising. For Google, mainly [CEO] Eric Schmidt, they wanted to invest even more. They think that AOL's future prospects are that strong.
Do you see a repeat of a bubble in the valuation of Web companies?
The Internet has barely gotten into its teenage years, and there is a lot more in front of us. But there will be many more competitors for the space, and the growth rates will be less robust. I think you are going to see things cool off a bit.
Why is the market not happy with Time Warner?
It's less specific to Time Warner than it is to our sector. Markets cannot deal with uncertainty, and there is a lot of uncertainty around the future prospects for the Old Media businesses. How are they going to fare and grow in this new digital age? Will piracy hollow out the margins in the content business? The market is saying: "Right now we don't know, so we're staying away."
Time Warner has a huge investment in magazines. Is that business in trouble?
No. It's a very good business. I'm going to quote my friend Warren Buffett. Shortly after I became CEO, everybody had a suggestion on how to fix the company. One was to sell the magazine business. Warren said: "If I were you, I wouldn't sell [it]. But if you do, sell it to me." He said people are going to be reading magazines for a long, long time.
Are you pleased that Ted Turner is no longer on the board, particularly since he can be difficult to work with?
No. Ted is a character. He has his own way of thinking. But all that said, the man is flat brilliant. Being a board member is a little too passive, too inactive for him. So he wanted to wait until most of the heavy weather was behind us, and now he's off to disarm the world, solve global warming, and sell some buffalo burgers.
Jeff Bewkes is now president and chief operating officer for the entire company after Don Logan announced his retirement. He is the clear No. 2. Is he going to succeed you?
I hope so. That's not my call at the end of the day. That's why you have boards. In my opinion, he's the guy who should.
There has been speculation about your running for mayor of New York. Do you intend to succeed Mayor Bloomberg?
No. I do like public policy, and I hope to find my way back there someday. I don't know that I would run for anything. My focus now, however, is on Time Warner and rewarding our shareholders.
You turn 58 in April. Do you have a concept of what you might like to do after Time Warner?
Actually, I do. I am interested in kids and in education. I think we have arrived at a place where that is the ultimate key to self-fulfillment, by allowing a person to realize their own potential to [achieve] social progress and mobility. I got a good education. That enabled me to do pretty much whatever I set my mind to in life. That can be most people's destiny, but they've got to get educated. Something in that sphere would be of interest.
What impact has race had on your career?
My being African American may be a disadvantage in that things that may have come to you, or opportunities, aren't as readily made known to you. In my case, it's been something of an advantage, though. I think that I have always been underestimated. You show up, and people -- not everybody, but many people -- just don't expect that you've got an A game. I am obviously aware of the fact that I'm African American. And I am actually cool with it. Then I just go do what I have to do.
Do you think it is important for us to have an African-American President?
I do, but I don't think it's as important as having a good President. It will be another step along the road to a society that Martin Luther King envisioned. All these firsts move us further down that road, so it's important in that sense.
You were an adviser to President Gerald Ford. What are your impressions of him?
He came across as a guy who was believable, who had integrity, who was trying to do his best, but who was fallible. He was, in a sense, quintessentially American. Within a very short period of time, the confidence of the country in its institutions of government was restored. I think the guy deserves huge credit for that. I don't think history has yet fully given him that, although I think it's coming.
So, is Tony Soprano [the lead character of Time Warner's HBO show The Sopranos] going to live?
At least for the next 20 episodes, or 19.