New Leadership at Time Warner?

Ever since Time Warner CEO Richard Parsons tapped Jeff Bewkes to be a top deputy five years ago, the former HBO boss has been seen as Parsons's highly regarded heir-apparent. Now, a media frenzy has developed over the exact timing of Time Warner's formal announcement of the passing of the baton. It all began Friday when the Times of London reported on its Web site that Time Warner would take the wraps off the Bewkes Era as soon as next week. Time Warner vehemently dismissed the account.

In fact, the newspaper may have been off a bit. Even before this week's board meetings--held in London--New York-based Time Warner had tentatively planned to drop the succession news during the first full week of November, a high-ranking company official, who asked for anonymity, tells NEWSWEEK. The idea was to get it out before Nov. 7 when third-quarter earnings are scheduled for release. Like this week's numbers from No. 1 cable operator Comcast, Time Warner's results may reflect some worrying news about Time Warner Cable, the nation's No. 2 cable operator and Time Warner's largest businesses. Comcast reported results that reflected the cable industry's slowing growth in basic-cable subscribers and high-speed Internet services. Time Warner, the official said, was calculating that word of Bewkes's ascension would spark a rise in Time Warner's long lethargic stock price in advance of earnings that might put shareholders in a selling mood.

The looming management shift, whenever it is unveiled, will mark another chapter in one of the most tumultuous corporate sagas of the past two decades. Time Warner owns some of the most prominent brands in all of media, ranging from HBO and CNN to People magazine and "Harry Potter" and "Lord of the Rings" from its Hollywood studios Warner Brothers and New Line Cinema. Parsons succeeded CEO Gerald Levin and chairman Steve Case, the architects of the monumentally disastrous takeover of Time Warner by America Online on the eve of the tech bust of 2000. Before the transaction, Time Warner's shares had only recently reached a historic high of almost $79 a share after languishing for much of the 1990s. The exploding tech bubble deflated Time Warner shares and left the company saddled with federal investigations and shareholder lawsuits. An executive with the skills of a diplomat, Parsons lifted the clouds of possible bankruptcy from Time Warner and reached multi-billion-dollar settlements that resolved its legal woes.

At the same time, AOL fizzled as the growth engine on which Time Warner had staked its future in the Internet age. Before the stock surged by more than 3.5 percent Friday to close at $18.35, it had largely remained flat for much of Parsons' five-year tenure.

For months now, media-industry investors and executives have been looking toward the Bewkes era. They've been speculating about the strategic shifts Bewkes would make to fire up Time Warner's stock price. The company has been under intensifying pressure to spin off, sell or seek strategic partners for some of its assets, including AOL, which has undergone successive dramatic redirections, and Time Inc., the world's largest magazine company. The most immediate questions may surround Time Warner Cable, however. Cable operators are facing increasing competition from telephone giants like AT&T and Verizon, which are beginning to aggressively offer television services.

Before Parsons selected Bewkes as a top deputy in 2002, Bewkes had headed up HBO, where he'd begun in the mid-1980s as chief financial officer. He is widely regarded as one of the rare financial executives who also have a flair for dealing with creative talent. According to Time Warner officials who asked not to be identified, Bewkes has already identified his chief lieutenant. John Martin, now chief financial officer of Time Warner Cable, will be named to succeed Time Warner's current chief financial officer, Wayne Pace. But Martin's responsibility will be broader, according to these officials, including merger-and-acquisition activities that are now part of the portfolio of other Time Warner executives.

On Friday night, a Time Warner spokesman declined to comment on the company's upcoming earnings report or any executive changes, having earlier characterized the Times of London's report as a "rumor."