In his most expansive remarks since consolidating power atop AOL Time Warner Inc., Richard D. Parsons this week fended off questions about whether he is a bold enough leader, and sufficiently focused on the company's stock price, to turn the troubled media giant around.
Although it has a $29 billion mountain of debt and faces uncertain ad revenue because of the prospect of war with Iraq, Parsons said the company has a strong management team, a sound long-term plan and great assets. But he acknowledged that immediate challenges are immense.
"I was reminded of a refrain from an old Beatles song," Parsons mused to major investors at a Bear Stearns media conference on Tuesday. " 'Yesterday, all my troubles seemed so far away. Now it looks as though they're here to stay.' "
Parsons believes that he, too, is here to stay, and personally committed himself to doing whatever it takes to fix the broken company that owns HBO, a stable of prosperous magazines led by People and Time, a struggling music business and successful movie studios.
"I can't fail at this," said Parsons, who recently was named chairman in addition to chief executive. "I've gotta make it happen. We can't fail."
Still, some major investors and analysts remain skeptical about a swift turnaround. An official of John C. Malone's Liberty Media Corp. told Bloomberg News yesterday that the company is more willing than before to consider selling its AOL Time Warner shares. And Ted Turner, the company's biggest individual stockholder, has sold 10 percent of his stake in the past month.
"There is concern about AOL right now," said Jupiter Research analyst David Card. "I don't think there is anything they can do to turn around opinion quickly, let alone turn around the company quickly."
In terms of leadership style, Parsons dismissed the suggestion that he is "too nice" to be effective, saying the characterization fails to recognize his most important role is putting the right executives into important positions across the company. He also argued that he has provided continuity at the top, where the company's two best-known executives, America Online founder Steve Case, and CNN founder Turner, have both resigned recently as officers.
Parsons said his top goals are paying down debt by running the company's far-flung businesses aggressively, and raising $2 billion to $4 billion by selling off the book publishing unit and the sports teams, and spinning off a stake in Time Warner cable this summer.
"I wouldn't want anyone here present to think we are in a fire sale mode," Parsons added, drawing laughter.
One compelling reason to reduce debt, Parsons said, is to eliminate the view that AOL Time Warner is a risky enterprise. He also said it is important to convince Wall Street that the Northern Virginia-based America Online unit is not a drag on the corporation but a plus. The AOL unit, Parsons said, throws off enough cash to fund its own operations and an extra $1 billion in free cash flow annually, even if it is not meeting earlier expectations for growth.
Parsons said that neither he nor anyone else knows whether America Online will succeed in its attempt to sell various premium services to subscribers, and make a smooth transition from its core dial-up Internet access business to faster broadband connections. "If someone says to me, 'There is risk there and I don't know how to value that,' I understand," Parsons said.
He also said there is no indication that the continuing civil and criminal probes into accounting problems at America Online will spill over into other AOL Time Warner divisions. "We did not anticipate we would run into this kind of . . . firestorm. But we are doing our best to manage our way through that," Parsons said.
Boosting the company's moribund stock price, which has dropped precipitously since America Online and Time Warner merged in January 2001, is a byproduct of managing well, he said. "It is a combination of being focused not on the end-game measure, but on the means to achieve the right end result," Parsons said.
He offered an analogy from childhood: "The most important thing in life is your health, but what does your mother tell you to do to have the best shot at it? 'Eat right and get plenty of exercise.' If we consistently produce superior performance and create a great company, the stock will reflect that," Parsons said. "It is unfortunate that putting some of the building blocks in place hasn't necessarily translated into a movement in the stock. I'm confident it will as we hit our numbers and move forward."
Parsons quipped that he wasn't sure if he was a "rogue" or a "celebrity" but that interest in boosting the stock price remains keen. "People see me on the street in New York and grab me and shake me and say, 'I've got your stock. Do something.' I say, 'Do what?' They say, 'I don't know. Just do something.' "