{ "docId": "019dd923-622b-71dc-a6dc-5545fa71721e", "docSlug": "852eb8103109", "documentTitle": "Time Warner Inc. (TWX)", "authorId": "14_Icahn", "authorName": "Lazard", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "activist_investor", "sourceTypeLabel": "Activist investor", "presentationDate": "2006-02-01 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 16, "pageCount": 371, "prevPage": 15, "nextPage": 17, "slideType": "executive_summary", "function": "diagnose_problem", "density": "dense", "nDataPoints": 2, "notes": "The slide uses a narrative format to expose management's strategic missteps and the resulting financial underperformance.", "elementsJson": [ "paragraph", "footnote" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-622b-71dc-a6dc-5545fa71721e/16", "deckHref": "/decks/019dd923-622b-71dc-a6dc-5545fa71721e", "deckJsonHref": "/decks/019dd923-622b-71dc-a6dc-5545fa71721e.json", "deckAnchorHref": "/decks/019dd923-622b-71dc-a6dc-5545fa71721e#slide-16", "components": [ { "bbox": null, "kind": "callout", "text": "The result has been dramatically more favorable for TWX's bondholders than stockholders. Since the current management team was installed, the bondholders of TWX have, on an indexed basis, generated a 40% overall return, while the stock has simultaneously lost 8% of its value.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-14db-7299-bdf4-ef4627379ea2", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.78, "x": 0.11, "y": 0.24 }, "kind": "paragraph", "text": "Mr. Parsons’ team attempted to implement his mandate from the Board. The team became obsessed with conserving cash. In the process, they vastly underestimated TWX’s future cash flows and financial capacity and misjudged the financial markets. The Company cut investments, sold assets, delivered earnings and gushed cash. The result has been dramatically more favorable for TWX’s bondholders than stockholders. Since the current management team was installed, the bondholders of TWX have, on an indexed basis, generated a 40% overall return,(c) while the stock has simultaneously lost 8% of its value.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "74729bf1-9366-40b7-8eba-92ab2d27d7d6", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.78, "x": 0.11, "y": 0.11 }, "kind": "paragraph", "text": "With TWX under pressure, Mr. Parsons understood his role as a conciliator. He was to mediate and restore peace among the divisions, reduce debt and meet quarterly expectations. He grasped the inherent problems of this role as well as anyone, when he commented in April 2002, “I’m desperately in need of a strategy.”(a) The absence of a strategy persists; when asked about his “grand plan,” in May 2005, he said…“[i]t’s not terribly different from what you see today.”(b)", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "bed8d6d5-dd34-4898-bf31-0daaec0d4cb9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.45, "w": 0.78, "x": 0.11, "y": 0.4 }, "kind": "paragraph", "text": "For the sake of maximizing quarterly earnings, each of the businesses put a stranglehold on new investments, both for acquisitions and for internal development (except TWC, which continued its Levin-era upgrade program). AOL has been managed as a declining annuity, without the long-term investment necessary to meet new competitive threats or create new technologies. AOL maintained its “walled garden” strategy well beyond its useful life, making the wrong bet against the resurgence of Internet advertising. AOL partnered with third parties (which leveraged AOL’s platform only until their own audiences were well-established) to generate immediate revenue and earnings rather than developing AOL’s own differentiated offerings. Yahoo, in contrast, run by a former senior TWX executive, invested in R&D and acquisitions and evolved into a leading destination site with unique capabilities in the search category and the paid listings category. Both TWC and Filmed Entertainment missed strategically critical M&A opportunities to grow and enhance their existing businesses, namely AT&T Broadband and MGM. AT&T Broadband, for which Mr. Parsons acted as the lead negotiator, was a landmark deal that changed the face of the industry and would have secured TWC’s position as the country’s leading cable operator at the time. In MGM, TWX had the opportunity to create an even larger film library under its own roof and extend its existing distribution rights. The Networks business did not create any successful new channels of scale because TWX put a damper on new investment. The Publishing business failed to launch any important new titles because of corporate budget constraints.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "da8b89b0-2e1a-4548-a621-2207d3d9888e", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "\"I'm desperately in need of a strategy.\" — Richard Parsons (April 2002); \"[i]t's not terribly different from what you see today.\" — Richard Parsons (May 2005)", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-14db-7299-bdf4-f26c2e724b6f", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.07, "w": 0.78, "x": 0.11, "y": 0.89 }, "kind": "source-note", "text": "(a) Nina Munk, Fools Rush In 261 (HarperCollins Publishers Inc. 2004).\n(b) Stephanie N. Mehta, Will Wall Street Ever Trust Time Warner?, Fortune, May 30, 2005.\n(c) Assumes price appreciation of 14.5% based on the weighted average price of TWX debt securities for which prices are readily available and includes coupon payments of a weighted average interest rate of 7.4%, which is aggregated on an annual basis.", "attrs": { "numbered": true }, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8d000334-2177-403b-9a23-118561ce36ae", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.26, "x": 0.62, "y": 0.08 }, "kind": "title", "text": "CHAPTER 1: THE CONTEXT", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "57107ace-8b86-4ea8-9275-c5e6f3c60f21", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [ { "to": 16, "from": 1, "beatId": "0ea18cde-bb53-4007-b758-f3553b68a4d4", "arcName": "The Consultant's Gambit", "arcSlug": "consultants-gambit", "beatName": "Situation & Context", "beatSlug": "consultants-gambit-situation-context", "evidence": "The document provides an overview of Time Warner Inc.'s situation and context, including its history, structure, and market environment.", "position": 0, "confidence": 0.8, "parentBeatName": "Setup", "parentBeatSlug": "setup" } ], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }