Time Warner chairman and CEO Richard Parsons decided to pass the baton to his No. 2 executive Jeff Bewkes a little early, announcing today that he will retire as CEO of the media giant he has led for the past five years effective on Jan. 1.
“Dick Parsons has done an outstanding job during his tenure as Chief Executive Officer,” said Time Warner board member Robert Clark in a prepared statement. “The board is grateful for Dick’s exceptional leadership in turning this company around and putting it on a solid foundation for the future. We look forward to working with Jeff Bewkes as he assumes the leadership of Time Warner going forward.”
Parsons, a long-time Time Warner executive, became CEO of Time Warner in May 2002 after then-CEO Gerry Levin retired in the wake of its disastrous merger with AOL and was named chairman in 2003. Parsons will remain chairman of Time Warner, at least until the company’s next annual meeting of shareholders in May.
Parsons was widely expected to retire this year – his contract expires in May 2008 – and has been vocal in his preference that Bewkes replace him.
That enthusiasm did not wane in the official announcement of the management change.
“Jeff is a well-respected business executive both inside and outside the company,” Parsons said in a statement. “His results-oriented management style and deep industry knowledge will be invaluable as he drives growth at Time Warner. Throughout his career, Jeff has demonstrated the capacity to generate industry-leading performances at our businesses, whether measured in terms of financial, operational or creative successes. We have had a terrific working partnership, and I am proud of what we accomplished together. As he leads Time Warner, Jeff will have my full support, and I am confident that Jeff will deliver a new era of growth for all of our company’s important stakeholders.”
Parsons took the helm of Time Warner during a tumultuous time at the media giant – its much ballyhooed merger with AOL had soured and the company was carrying a huge amount of debt. In his first public appearance as CEO – at Time Warner’s annual shareholders meeting in May 2002 – he outlined a five-point plan to reinvigorate AOL; restore credibility with investors; guard the integrity of the balance sheet; simplify the corporate structure; and re-energize its employees.
Parsons had the most luck with the balance sheet – Time Warner pared its debt from $30 billion to $20 billion a year ahead of schedule under Parsons’ watch. And last year, the company decided to scuttle AOL’s subscription-based model for an advertising-based focus, which has had limited success.
Parsons also beat back a threat from activist investor Carl Icahn, who in August 2005 joined forces with investment banker Bruce Wasserstein to oust management and split up the company. Icahn settled with Time Warner in February 2006, after the media giant agreed to boost its share buyback program to $20 billion from $12.5 billion.
Bewkes has long been regarded as a top candidate for CEO and joined Time Warner unit Home Box Office in 1979, becoming chief financial officer of the premium cable channel in 1986. He moved steadily up the ranks – becoming president and chief operating officer of the unit in 1991 and CEO in 1995. During his tenure at HBO, the unit delivered 16% compound annual cash flow growth and secured a reputation for high quality series such as The Sopranos and Sex and the City.
In 2002 Bewkes was named head of Time Warner’s Entertainment and Networks Group after former Time Warner chief operating officer Bob Pittman resigned. He was named president and chief operating officer of the entire company in 2006.
But just what Bewkes will do in his new role remains to be seen. Several analysts have speculated that as CEO, Bewkes can make some wholesale changes at the media giant, namely spinning off its troubled AOL unit and reducing its 84.5% stake in Time Warner Cable.
In his prepared statement, Bewkes hinted that further changes could be on the horizon.
“We have a lot to do, and I’m intensely focused on building shareholder value,” Bewkes said in the statement. “Everyone at Time Warner owes Dick a debt of gratitude for his leadership as CEO over the last five years. Dick accomplished much to restore Time Warner’s stature as the world’s leading media and entertainment company, and he put into place the foundation and flexibility for our future growth.”
In a research report, Oppenheimer & Co. media analyst Tom Eagan said that Bewkes is expected to be more aggressive in restructuring the company.
“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,” Eagan wrote. “Key timing to us is March 2008, which is the five-year anniversary of the Time Warner Entertainment partnership. We expect any restructuring will occur after that date to reduce restructuring-related taxes.”