Saturday, February 18, 2006

Just another way to destroy shareholder value--the latest at Time Warner

In my nascent blog in December(on 12/16), I made some comments in two parts about Time Warner and the immense value in the company that wasn't being managed, but could be by the company itself and not by outsider influence. Events now are such a disappointment. The players have been:

Carl Icahn---a wart on Adam Smith's invisible hand; long time corporate raider--- don't get me wrong, there is nothing wrong with leveraged buy outs. They can throw out entrenched self serving management, incent workers for performance, and revive a dying company--- and then there's Icahn, who goes in like a leech, takes everything he can, and leaves a company, community, and workers to, at best, follow their newly charted Darwinian path(the revival of this approach at private equity firms today is very troubling). His lack of visibility in the late 80's and first half of the 90's was( just my very opinionated guess) a result of his successful effort to avoid a Boesky like downfall. At 70, now he can try to look like a corporate statesman. And it seems as if it's working, as the NY Times even treated us to a description of this person's 70th birthday.

Bruce Wasserstein---a top investment banker; unfortunately that distinction includes people who will do virtually anything for money, power and prestige-- they can manipulate the facts and analysis, and if it works, well that's business for you. Hearsay is that Wasserstein is razor sharp, arrogant, and demanding. It will ultimately not be good for him to link himself so publicly with someone like Icahn. He's presumably better than that.

Dick Parsons---CEO of Time Warner; a master of compromise who was able to move toward ending the long standing dysfunction created by the mergers of Time, Warner Communications, and AOL(yeah it goes back that far). He has been a positive force. But he is also, it seems, a CEO who is not capable of taking the next step. Time Warner now needs a heavy charismatic hand at the top to integrate related businesses, sell unrelated businesses, manage costs, stop cross subsidies, and attack the fiefdoms that still definitely exist.

The Outcome of the Fight---lots of legal expenses, communications expenses, management focus etc. for shareholders to pick up; a commitment to more share buybacks and more expense reduction by Time Warner(not as tangible at any company as the publicists would have you think); lots of publicity for the egos of Icahn and Wasserstein, who are both so wealthy that this is perhaps the biggest reward; and no changes of substance.

As a small shareholder, one of many, I received a letter from Time Warner dated 2/7 related to the then current situation. It was full of platitudes and the usual corporate PR BS that seems to be required. But it talked about growth and it talked about huge buybacks of stock. Is that consistent? If there are growth opportunities, invest in them. If not, buy back stock and cut costs dramatically. Sell businesses, stop treating top and middle management as if attendance at work is a sinecure for large salaries, and run this company like a business, not the regal country of Time Warner. And to the Board, do it yourself. Don't wait for more prodding from the outside that will destroy more shareholder value. Just quit your board seats if you are not going to do anything but fly in the corporate jets and eat at the extraordinarily expensive restaurants on the fourth floor of Time Warner center.


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