Time Warner CEO Parsons to Resign

Head of the world's largest media conglomerate said he will step down as of Jan. 1; chief operating officer Jeffrey Bewkes will take over as CEO.

By Paul R. La Monica
CNNMoney.com editor at large
November 5 2007: 3:12 PM EST

NEW YORK (CNNMoney.com) -- After a more than five-year stint running media conglomerate Time Warner, chairman and chief executive officer Richard Parsons announced Monday that he will resign as CEO as of Jan. 1, 2008.

The company said Parsons is turning over the CEO reins to Jeffrey Bewkes, currently the president and chief operating officer of Time Warner. Parsons will remain chairman.

The announcement has been long-expected as Parsons' contract with Time Warner expires in May 2008.

Time Warner (Charts, Fortune 500), in addition to being the parent company of CNN and CNNMoney.com, owns the Warner Bros. movie studio, Internet company AOL and a majority stake in Time Warner Cable (Charts).

"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," Parsons said in a statement. "Jeff is a well-respected business executive both inside and outside the company."

Bewkes will retain his title of president, the company added.

The handoff comes at a tense time for the large media company, whose stock, trading at about $18 a share, is roughly where it was when Parsons took over in May 2002.

Shares of Time Warner were trading about 1 percent higher Monday afternoon following the announcement. The stock had gained as much as 3.2 percent earlier in the day as CNBC and The Wall Street Journal both reported that the news about Parsons was imminent.

The stock has underperformed that of other large media rivals, such as Walt Disney (Charts, Fortune 500), News Corp. (Charts, Fortune 500) and Viacom (Charts, Fortune 500), over the past year.

Parsons successfully fended off calls to break up the sprawling media company. Some investors have argued that a split could boost the overall market value of Time Warner.

But it is not clear that Bewkes, who was named president and COO in 2005 after a long successful stretch at the HBO division, would be similarly resistant to a major restructuring.

On the table, some analysts have speculated, are the complete spinoff of the cable division, selling the Time Inc. publishing division, and either taking AOL public or combining it with one of its rivals.

AOL has been playing catch-up to the likes of Google (Charts, Fortune 500) and Yahoo! (Charts, Fortune 500) in the lucrative online advertising market.

"We consider Mr. Parsons' (largely expected) resignation a positive for the stock because his successor Jeff Bewkes will likely be more aggressive at restructuring the company," wrote Oppenheimer & Co. analyst Thomas Eagan in a report Wednesday. "We expect Mr. Bewkes will be less sentimental about selling or spinning off divisions, such as publishing, or reducing the current 84.5% stake in cable systems."

Under Bewkes' watch, the company has already publicly listed some shares in the cable division, sold off some magazines and revised AOL's business plan to focus more on Internet advertising and less on subscriptions for e-mail and Internet access.

"I welcome this opportunity to work with my colleagues and the board to lead this company successfully into the future. We have a lot to do, and I'm intensely focused on building shareholder value," Bewkes said in the company's statement.

According to a recent profile of Bewkes in Fortune, a sister publication of CNNMoney.com, Parsons and Bewkes have very different resumes as well as different management styles.

Parsons, a Brooklyn-bred lawyer whose career included stints working for the Rockefeller family and turning around New York's Dime Savings Bank, is known for his affability, diplomatic skills, and social interests (ranging from late-night Grammy parties to his vineyard in Tuscany), Fortune noted.

Bewkes, who grew up in New Jersey and Connecticut, is an alumnus of Deerfield Academy, Yale, and the Stanford Business School. He toyed with becoming a TV reporter and worked briefly in banking before joining HBO as a marketing manager in 1979.

Where Parsons can appear carefree in the middle of a typhoon, Fortune reported, the wire-thin Bewkes, who at 55 is four years Parsons' junior, can seem like a man on a mission who will get around to sleeping or eating next week.

He is, associates say, as relentlessly curious about the minutiae of finance or the HBO development slate as he is about adjusting drapes and lighting when he comes into a room. One person who knows both men well says Bewkes can have much sharper elbows than Parsons and can be a tough boss to please.

Time Warner will report its results for the third-quarter on Wednesday and investors will be eager to hear what Bewkes has to say about the future of the company now that he is set to take charge in January. Bewkes is also scheduled to speak at a media conference in New York later Wednesday afternoon.

Martin Pyykkonen, an analyst with Global Crown Capital, also said he thinks Bewkes is more likely than Parsons would have been going forward to sell off more or even all of the cable business. He said the more critical question concerns what types of businesses Bewkes wants to bulk up, not what he's planning to shed.

"Cable is a great business from a cash flow standpoint, but Time Warner could sell it and invest more in digital media," Pyykkonen said. "The more important question that few are asking right now is what does Time Warner do with the money from any asset sales. The media world is in a state of flux."