Sunday, February 19, 2006; F02
No doubt about it -- the long-awaited telecom revolution is upon us. But for companies in the vanguard of that revolution, the going can still be a bit rough.
Time Warner last week beat back a determined six-month campaign by billionaire Carl C. Icahn to take control of the struggling media giant. But the victory was not without its costs. Chief executive Richard D. Parsons had to agree to quadruple the size of the company's stock-buyback program from where it was when Icahn showed up on the scene. He also agreed to further cut expenses by $1 billion and add two directors to the board.
Icahn had attracted several hedge funds as allies, along with investment firm Lazard Ltd. and a respectable slate of new directors that included former Viacom chief Frank Biondi, who was to replace Parsons. But his efforts had failed to revive Time Warner's languishing stock, and big investors were apparently unimpressed with Icahn's plan to break the company into four parts.
Meanwhile, the shares of satellite radio twins XM and Sirius took a dive after both companies reported widened quarterly losses despite continued growth in subscribers and revenue. Both companies reported sharp increases in total spending for both acquiring new customers and luring expensive new programming, including Sirius's new star, Howard Stern, whose show launched last month. XM director Pierce "Jack" Roberts Jr., who once was a telecom investment banker at Bear Stearns, resigned from the board, saying in a letter that he was "troubled about the current direction of the company" and warning of a crisis if the company did not narrow its losses more quickly.
It wasn't a particularly good week for Google and some of the other Internet companies, either. On Capitol Hill, lawmakers criticized them for what one called their "sickening collaboration" with the Chinese government in its crackdown on free speech. While several companies said they regret their cooperation, they also expressed a belief that, overall, democracy and free speech are enhanced by their presence in China.
Also on Capitol Hill, Verizon and the other regional phone companies got a decidedly mixed reception to their plea for national legislation that would allow them to compete directly with cable companies in offering television and video services without going through the costly process of securing franchises from every municipality.
Meanwhile, RadioShack, which once had a solid position in selling all the toys of the telecom revolution, said it would close as many as 700 stores after its profit fell 62 percent in the recent holiday quarter. Not only has RadioShack has been steadily losing market share to Best Buy and Wal-Mart, but last week the company also announced it was investigating chief executive David Edmondson after he acknowledged that he had lied on his résumé about his academic credentials.
