Prime Time For Parsons

Cutting the debt was easier than expected. In just months, Parsons raised more than $6 billion. About $2.6 billion came from the sale of Warner Music. He deftly managed the sale by playing interested buyers off each other--music giant EMI and investors led by Seagram scion Edgar Bronfman Jr. To close the deal, Parsons set a 72-hour limit for Bronfman to negotiate his winning bid.

If only the AOL unit could be fixed so quickly. There are signs of progress. The latest version of AOL software, 9.0, is winning high marks from critics. Since the second quarter, AOL has begun attracting new advertisers, who have spent at least $175 million so far with the online service. Now CEO Jonathan Miller is projecting double-digit growth in ad revenue for next year. Yet its most fundamental problems remain. Some 2.6 million dial-up subscribers have abandoned the service. Says analyst Tom Wolzien of Wall Street's Sanford C. Bernstein: "You've got to give Parsons a lot of credit. But the big issue, the future of the online business, remains." Parsons acknowledges as much: "What we're trying to figure out is a model for long-term growth." Parsons rebuffed an emissary of online mogul Barry Diller who approached him informally about a potential sale of AOL. Diller said he did not authorize anyone to approach Time Warner. But he added that he believes a dealmaker did so in hope of brokering a sale.

While AOL will remain part of the company for now, it's not clear whether the same can be said of board members Case, Miles R. Gilburne and Kenneth Novack. The three are the only remaining influential AOL officials from the period when the alleged accounting irregularities occurred, and shareholders seem disenchanted with them. Early this year a surprisingly large number of investors voted against re-electing them. In light of last year's vote, the board inevitably will have to consider the matter before deciding on the slate of candidates to be presented to shareholders in May.

Parsons's own future is more secure than ever. He is likely to be awarded a huge bonus this year. Only his legacy and successor are in question. "To maximize the value of Time Warner" is his answer to the first. Some officials inside the company wonder if he'd ever do that by presiding over a sale of the company. But unlike a year or so ago, that doesn't seem to be in the stars. "This is a great company," Parsons says, adding that he personally loves "the things that we do, that we create." (He can enjoy the spotlight a bit, too, as when he attended the world premiere in Berlin last week of New Line's final episode of "Lord of the Rings.") At about $100 billion in value, including $20 billion in debt, Time Warner would choke almost any suitor. And it is an unlikely target for the few companies that could afford it. If the current trends hold, the 55-year-old Parsons may have a long tenure, making the question of a successor less urgent. One sign of how relaxed the company is these days is that top execs can joke openly about turnover. At a recent birthday toast for Parsons, one potential successor joked about Parsons's bright prospects. "If I had known he was 55, I wouldn't have taken this job," Bewkes said, according to a reveler. "I thought he was 63." Then again, everyone may be feeling a little older after the past few years.

© 2003