Prime Time For Parsons

Just 18 months ago, Richard Parsons faced a mass of angry shareholders at his first annual meeting as CEO of AOL Time Warner. Their list of complaints was long: a plummeting stock, strategic gaffes, even the shimmering headquarters project that one said was "replicating the Taj Mahal.'' But recently, Parsons was holding court in the almost-completed building, and much had changed. He had added the chairman title, the company had dropped AOL from its name, and Parsons felt confident enough that he could share a few grand thoughts with his audience of minority and women construction contractors. The gleaming 80-floor structure, with its two crystalline towers, is called Time Warner Center, he noted, because its location at Columbus Circle is literally the center of New York City. What better spot for the world's largest media company than at the heart of the world's capital of big media companies? "I predict this will be the most famous building in the world," he declared.

It was a rare bit of hyperbole from Parsons, considering that one of the hallmarks of his turnaround at Time Warner has been his determination to understate the goals of a company once built on hype. But Parsons can afford to loosen up a bit. He's led a methodical, unglamorous, yet successful effort to stabilize a media and entertainment giant that almost collapsed under the weight of history's worst deal ever. Time Warner's stock reached a new yearlong high of $17.47 last week. And in less than a year, Parsons has also chiseled the company's debt to $20 billion from $30 billion. Most of its divisions are thriving, especially its Hollywood studios and mammoth cable-TV businesses. Cooperation has supplanted infighting among top executives. Even AOL, though still mired in federal probes of possible financial misdeeds, has a stronger pulse.

Time Warner is so revitalized, in fact, that it's openly exploring major acquisitions again. "We're now in a position to play," says Parsons, adding that the company can afford a deal next year with price tags of up to $8 billion in cash. The top priority: expanding its cable holdings. After all, Time Warner Cable, the No. 2 cable operator behind Comcast, is growing fast, fueled by an array of digital services, including movies on demand, broadband access and TiVo-like recording and playback. Last week Time Warner unveiled plans to provide Internet phone calls through cable (sidebar). Potential takeover targets include Adelphia, now in bankruptcy, and Cablevision, which dominates suburban New York.

But there's a long-shot scenario in the mix that's more intriguing. Time Warner could put Disney in its sights. "The easy thing would be for Parsons to buy cable," one senior Time Warner executive says. "'Is he going to buy Walt Disney?' is the more interesting question." For years, Disney has been a subpar performer, and has been mentioned often as a potential target for Comcast. Time Warner execs say Parsons would consider making a friendly bid for Disney--but only to rescue it from a hostile-takeover attempt. A Time Warner spokesman says the company is focusing on growing its businesses, not coveting Disney.

Parsons once seemed like a long shot himself to lead a turnaround. He was, after all, on the Time Warner executive team that rushed into the merger with AOL. But Time Warner's board sensed that the low-key and diplomatic Parsons could sort out the mess, and unanimously voted him into the CEO's job when Gerald Levin quit, and into the chairman slot when Steve Case was forced out last January.

Parsons laid out clear goals--reduce the debt, end the civil wars and the hype, and repair AOL, among others. But his first step was to appoint two lieutenants to oversee the sprawling operations. Don Logan, the veteran CEO of Time Inc., was named chairman of media and communications. Jeff Bewkes, the HBO boss, was handed responsibility for cable, music and Hollywood. With their help, Parsons set a clear road map for other goals. "Our company had a reputation for switching gears every 30 days," says Logan. Parsons bluntly told the employees that staffers had to put the past behind them or leave the company. "People have a sense we're making progress," Parsons says. It helped that Time Warner issued a boatload of new stock options last February at about $10 a share, many of which are already in the money.