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Time Warner Considers Spinoffs

Time Warner stock has lost 7 percent of its value in the past year. Shares closed down 44 cents yesterday, at $15.40.

Analysts are puzzled by and critical of the slumping stock price, given Time Warner's substantial properties, including Warner Bros. movie and television studios, the New Line film studio, AOL, the 125 titles of the Time Inc. publishing arm, Time Warner Cable and the cable television networks of Turner Broadcasting, including CNN and top-ranked TNT.

If Time Warner were to sell off its non-entertainment properties, such as Time Warner Cable, and concentrate on creating content, Wall Street estimates that its stock would trade closer in value to Viacom's, which closed yesterday at $38.29 a share. In 2006, Viacom split with CBS, which took the entertainment giant's television, radio, outdoor advertising and theme-park properties, leaving Viacom with only cable television and Internet properties, such as MTV and Comedy Central, home of the popular "Daily Show."

There has been talk within Time Warner of folding New Line, producer of the "Lord of the Rings" trilogy, into Warner Bros., but no decision has been made, the source said.

Cable industry executives suggest that Time Warner is more likely to spin off its interest in Time Warner Cable than it would be to sell the majority stake to another firm. With 15 million subscribers, Time Warner trails only Comcast, which has 24 million, nearly 30 percent of all U.S. cable subscribers. The Federal Communications Commission has been considering capping cable ownership at 30 percent, meaning Comcast could not swallow a company the size of Time Warner Cable without exceeding the cap. The third-largest cable company, Cox, is one-third the size of Time Warner Cable.

Bewkes is a veteran of Time Warner's content side. He spent most of the 1990s with HBO, building the premium cable channel into a programming powerhouse, with hits such as "The Sopranos" and "Sex and the City."

He took over Time Warner at the beginning of last month and commenced a company-wide review off all of its business units.

Though Bewkes is well-regarded within the company, some outsiders have questions.

In an analyst's note yesterday, Pali Research's Richard Greenfield referred to Time Warner's "miserable" stock performance and asked why Bewkes's contract stipulates that he can leave the company without penalty if he is not elected chairman, in addition to chief executive, by the first of next year.

"Good corporate governance should imply a separation of the chairman and chief executive roles (ideally with an outsider taking a non-executive chairman's role)," Greenfield wrote.

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