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  "documentTitle": "Time Warner Inc. (TWX)",
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  "presentationDate": "2006-02-01 00:00:00",
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  "notes": "The slide uses a Morgan Stanley quote to support the thesis that vertical integration is rarely successful.",
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      "kind": "callout",
      "text": "Each of the four independent divisions should be a leading company in its sector and provide a straightforward alternative to investors seeking exposure to the industry. Each of the divisions, over the long-term, is likely to trade at a premium valuation (with the exception of AOL) given the scale and growth characteristics of the business.",
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      "text": "The business units of TWX should be separated.",
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      "kind": "paragraph",
      "text": "growth through the expansion of its brands onto new media platforms and through international acquisitions. Publishing has no material strategic or financial ties to any of the other TWX divisions.",
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      "text": "TWC does not require any ownership link to TWX and its content assets. Worldwide and industry-wide, the value of integrating distribution and content remains, at best, unproven. The fundamental flaw in any integration logic between distribution and content is that revenue flows amount to a “zero-sum game” within an ecosystem. Any commercial transaction benefiting a cable network will commensurably impose a cost on the cable system, and vice-versa - - this is a classic argument well developed by analysts. As Morgan Stanley recently stated in connection with the separation of Viacom, “In general, we believe that there is strong evidence that vertical integration between content and distribution companies has had limited, if any success.”(a) A careful observation of the industry suggests that vertical integration is a rare occurrence; the exception rather than the rule TWC requires no ownership link to the other divisions of TWX.",
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      "text": "The business units of TWX should be separated. If there are strategically attractive cross-selling, cross-promotion or licensing arrangements that exist today between the divisions (which inevitably are at “arms-length”), such arrangements can be extended and formalized prior to separation so that each SeparateCo can continue to benefit. The divisions do generate revenue from arms-length transactions with each other; however, such revenue as a percentage of total TWX revenues has declined each year since 2002 (representing 5.0%, 4.0%, 3.6% and 3.3% of total revenue for 2002, 2003, 2004 and 2005, respectively).",
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      "text": "TWC: TWC is in the distribution business and needs to defend its market position against Telco, satellite and other emerging competition. Cable is a higher capital-intensive business that can support higher leverage than the other divisions of TWX. TWC has a clearly defined universe of publicly traded companies to which it can be compared and the cable sector is valued based on well-recognized and accepted metrics.",
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      "text": "In general, we believe that there is strong evidence that vertical integration between content and distribution companies has had limited, if any success. — Richard Bilotti, The Sum of the Parts is Greater Than the Whole, Morgan Stanley, December 15, 2005.",
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      "text": "(a) Richard Bilotti, The Sum of the Parts is Greater Than the Whole, Morgan Stanley, December 15, 2005.",
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      "kind": "title",
      "text": "CHAPTER 5: SUMMARY AND RECOMMENDATION",
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