AllThingsD » Dick Parsons

Former Time Warner Boss Dick Parsons Gets Back in the Media Business

Peter Kafka — Wed, 16 Sep 2009 12:25:11 +0000

There are very good odds that there are going to be some very big deals happening in the media world in the next year or so. So this move makes sense: Former Time Warner (TWX) CEO Dick Parsons is joining up with Providence Equity Partners, the private equity firm with a hankering for media investments.

Parsons will be a part-time adviser says the New York Times and will keep his current job as Citigroup (C) chairman as well. Providence’s media bets include MGM and Univision, which haven’t worked out, and Hulu, which has.

Providence and Parsons have worked together at least once before: In 2004, Parsons sold Warner Music Group (WMG) to a consortium that included Providence, Thomas H. Lee Partners and Edgar Bronfman Jr.

Perhaps Providence will tap Parsons’s knowledge of his former employer for another deal: Time Warner executives keep murmuring about the need for magazine publisher Time Inc. to shed some of the 115 titles it operates.

The $125 Million-Sweet DailyCandy Revenge of Bob "Pitchman"

Kara Swisher — Wed, 06 Aug 2008 13:55:09 +0000

Oh, there had to be much, much gnashing of teeth in the corporate offices of the Time Warner Center in New York yesterday with news of the sale of DailyCandy to Comcast for $125 million.

Why?

Maybe because that tasty payment is going right into the hands of Bob Pittman’s Pilot Group Ventures, which bought the fashion and shopping newsletter business for $3 million in 2003.

Longtime media exec Pittman was the former star AOLer, whose nickname was Bob “Pitchman” for his smooth-as-silk selling and even more marked spinning skills.

But the Web 1.0 supernova fell quickly to earth, after the online service merged with Time Warner (TWX) in early 2001, in what is now considered one of the more significant world-class corporate disasters.

After being tossed out of AOL Time Warner in mid-2002, Pittman (pictured here), along with AOL head Steve Case, was blamed for the stock decline and other woes at the media giant by the Time Warner side, whose deep bitterness toward him has never really faded away.

Now, with Time Warner trying to make a deal to sell the AOL unit for up to $10 billion to Yahoo or Microsoft–despite it being valued at $20 billion only a few years ago–Pittman’s small but impressive score has got to grate.

“I have been associated with the start-up, turnaround or acceleration of many companies and major brands, and rarely have I seen the kind of creativity, commitment and passion I’ve seen day in and day out at DailyCandy,” said Pittman in a letter to DailyCandy staff yesterday about the sale. “And the results speak for themselves: Since we made our investment in 2003, subscriptions have grown from just over 200,000 to over 2.5 million.”

In the letter, Pittman said the company’s EBITDA was over $10 million this year on revenues of $25 million.

This is certainly different from the situation almost exactly six years ago when Pittman was driven out of the then-named AOL Time Warner on the proverbial rail.

If you want a taste of those once-grim times for Pittman, here is an excerpt from my book, “There Must Be a Pony in Here Somewhere: The AOL Time Warner Debacle and the Quest for a Digital Future,” which was published in 2003.

The section comes from Chapter Six, “Way, Way After the Goldrush,” as the deal imploded:

THERE’S NO BUSINESS LIKE NO BUSINESS

Despite the troubles, Pittman, Case and [former AOL Time Warner CEO Dick] Parsons grinned out from the June 2002 cover of AOL Time Warner’s internal magazine, called Keywords, under the headline “Lift Off!” Actually, “Grounded!” would have been a more accurate headline, given the problems that would mount over the summer.

That was especially true at AOL, where Pittman found that just about everything–from morale to ad sales to subscriber numbers–was trending downward at an accelerating pace.

He had grown weary of infighting at the company, exhausted from the traveling and worn down by the prospect that turning around AOL would take more work than he had ever imagined.

For three months, he’d been trying to revive AOL while still working as COO of the combined company. Pittman was stretched about as thin as he could go, and AOL was still sputtering.

“He had been getting a pounding and he did not see a way to turn it around,” said AOL marketing whiz Jan Brandt, whom Pittman had brought back into the top echelons of the company upon his return. “And there was no end in sight.”

Indeed, for Pittman, there was no end in sight for the time it might take to fix AOL, especially because of how badly he and his team had alienated the entire Time Warner management.

The New York Post even began running a regular “Pittman Meter,” an obnoxious graphic that offered assessments ranging from whether he was “toast” to “safe” on any given day.

Mostly, Pittman was burnt to a crisp.

With increasingly skepticism that he could fix the problems at AOL, Pittman went to Parsons before the July 4th holiday weekend and told him he wanted out.

“I can’t do this anymore,” said Pittman to Parsons, who urged him to think things through over the weekend.

But the weekend put him over the edge, when the New York Times–whose reporter, David Kirkpatrick, had become a favored outlet for disgruntled Time Warner executives to vent—ran a scathing piece detailing Pittman’s failure to turn things around at AOL and suggesting there was a target on his back.

“Executives and shareholders are united in more or less open revolt,” wrote Kirkpatrick. While the story referred to discomfort with the departed Levin too, it singled out Pittman explicitly.

“Most of all, Time Warner executives have turned their ire specifically at one man–Mr. Pittman, a former America Online executive who became chief operating officer after the merger,” it read. “He angered many Time Warner executives with what they called his brusque manner … he developed a reputation for brashness, ruthlessness and success at America Online, and he applied the same tactics at Time Warner on his return.”

As if channeling the Time Warner side’s anger, Kirkpatrick summed up their message: “Now many executives from the former Time Warner wish the merger would go away, and, barring that, they wish that Mr. Pittman would.”

In the article, Parsons was quoted offering a rather tepid defense of Pittman: “People get angry and that anger has to be attached to something or someone,” he was quoted as saying. “Some of it has been attached to Bob and I am not sure if it is entirely fair.”

Well, not entirely, Parsons’s quote seemed to indicate to me–but maybe it’s a little fair! This deft response definitely did not look good for Pittman.

And with Parsons firmly ensconced in the CEO position and no place higher up on the ladder for Pittman to go, what sense did it make for him to keep fighting what was, for the foreseeable future, a losing battle in which he would probably end up getting tossed out anyway?

With the executive ranks blaming him and the board losing faith that he could turn AOL around, Pittman had no chance of regaining any credibility as COO.

“Pittman left on own steam, but he knew what was coming,” said one board member, who actually admired Pittman.

Pittman wanted to announce he was leaving, but Parsons asked him to delay the news until the board could approve a new management structure in mid-July.

His plan was to promote Time Inc.’s Don Logan and HBO’s Jeff Bewkes to the top of the AOL Time Warner structure, effectively splitting Pittman’s duties into two positions, both of which would report directly to Parsons.

Logan would head the Media and Communications Group, the subscription and ad businesses that would include Time Inc., Time Warner Cable, the Interactive Video Unit, Time Warner Books and AOL.

And Bewkes would run the Entertainment and Networks Group, made up of HBO, New Line Cinema, The WB, Turner Networks, Warner Bros. and Warner Music.

Getting the pair interested in the arrangement would be difficult, given the recalcitrance both had felt toward the merger in the first place.

But it was critical for Parsons to pull this off, since Logan and Bewkes were considered the best and most successful operators in the company, though they were vastly different in personality and style.

Logan, who had been the CEO of Time Inc. since 1994, was one of the most admired managers in the company, especially within his division, where he was openly revered for turning around the fortunes of the magazine publishing house.

An Alabama native, he was the son of a housewife and a welder for the state highway department. Logan went to Auburn University as a math major, and worked his way through school as a computer programmer for NASA in Huntsville. He continued his studies–specializing in abstract math–at Clemson University, and went on to pursue a doctorate part-time the University of Houston.

While in Texas, he worked for Shell Oil, creating research tools in the search for oil, but he found big-company life too slow.

Answering an ad for a Birmingham, Ala., publishing company called Progressive Farmer, later renamed Southern Progress, Logan worked first in data processing and fulfillment and later in direct marketing.

Time Inc. bought Southern Progress in 1985, and Logan was running it by 1986.

Admiring Logan’s reputation for consistent results, [former Time Warner CEO Jerry] Levin brought him to New York in 1992 as Time Inc.’s president and COO. Logan got the CEO spot two years later.

Logan fulfilled Levin’s expectations by goosing the magazine division’s results dramatically, turning in 41 consecutive quarters of earnings growth and tripling its cash flow.

Logan managed all this while affecting a folksy Southern image as a good old boy who just loved to go fishing. (He had even appeared on the cover of Field & Stream in a feature about jungle fish.)

Pretty much everyone I asked about Logan felt the need to mention his fishing, as if it were mysterious and complex part of his nature–imagine that, a fishing math major!

In the company newsletter, Logan was quoted as noting that business was a lot like fishing, in that they both require “persistence and patience.”

The burly Logan might have had true “down home” bona fides, but he was as smooth as any city slicker in leading the potentially divisive troops at Time Inc.

His greatest strength appeared to be in leaving people alone, yet demanding performance as a price for that independence.

“He was a straight talker in a culture of bullshit and platitudes,” said former Pathfinder executive Linda McCutcheon. “And he believed you grew incrementally to greatness.”

The very qualities that were so admired at Time Warner were derided by AOL’s top brass, who considered Logan a typical Time Warner corporate timeserver and not much of a risk taker.

“He thought growing at five percent a year was a great accomplishment,” said the voluble [AOL ad exec] Myer Berlow. “He was not exactly the kind of person who welcomed us.”

The AOLers expected more rapport with Jeff Bewkes, the glib and good-looking head of HBO.

Much as everyone mentioned Logan’s interest in fishing, the word Time Warner people invariably used to describe Bewkes was “handsome.”

And he is indeed a handsome man, slim and tall with a curious mix of Hollywood glamour and vague preppiness that suited the more conservative elements of the company.

“Golden boy” had long been a defining image for Bewkes, who was a graduate of Yale University and Stanford Business School (again, that heady mix of traditional East Coast and trendy California).

The impact he made was a strong one–an executive comfortable with both Hollywood talent and deal makers alike.

Bewkes came to HBO many years previously, and worked in the finance and marketing departments. He was considered a winner even in his earliest days.

“We all used to assume he would eventually be the boss,” said a former AOL executive Mark Walsh, who worked with Bewkes at HBO. “He had this air of the inevitable about him that was very appealing.”

His star rose quickly and he eventually became the chairman and CEO of HBO, building a close-knit team around him that was responsible for burnishing the somewhat dull image of the pay-cable channel to an edgy sheen with such huge hits as “The Sopranos” and “Sex and the City.”

This conspicuous success quickly attracted AOLers, who identified with Bewkes’s more outgoing style and considered his passionate, entrepreneurial nature akin to their own.

They could not have been more wrong about his regard for AOL, though–Bewkes was one of the first executives to complain internally and loudly about the idiocy of the merger deal.

He wasn’t shy about challenging Steve Case’s dreamy ideas of convergence in company meetings, and he could pull it off because his HBO success gave him such credibility.

Bewkes’s ability to move with comfort through all parts of the company made everyone assume that he was headed for bigger things.

That included AOL, which Bewkes was asked to fix in early 2002. It was a position he’d quite smartly turned down, obviously aware that grabbing onto that sticky situation would hurt him.

Pittman really had no choice in being the one to take on AOL–although I joked to him when he went back to Dulles that he’d just been handed a tar baby that he’d have a hard time pulling away from without damage.

That was finally clear when the company announced his departure–which had been widely leaked in newspapers–on July 18.

As usual, his public statement had an odd mixture of spin and truth to it.

“I’ve decided that after a new CEO is in place at AOL, I won’t return to AOL Time Warner as chief operating officer,” he said. “Having worked so hard to build the AOL service and brand, and after then going through the merger and the last 18 months, it’s time to take a break.”

Managers and staff at other company divisions greeted the news of Pittman’s departure and the ascension of Logan and Bewkes with joy.

“The Taliban have been routed,” joked irrepressible Time Inc. Editorial Director John Huey, in what was a common sentiment.

Finally, Time Warner had taken back the company from the horrible invaders. The gloating ran rampant.

Media pundit and New York columnist Michael Wolff, who had worked with Time Warner on its various failed Internet efforts, took a dim view of the glee in his “This Media Life” column.

Wolff correctly asked: What had Time Warner really won by purging Pittman–who walked away with a fortune–and where would that leave the company?

“Of course, taking it out on the guy who outsmarted you does not, in turn, make you smart,” he wrote in his slap-down style. “[Pittman] doesn’t hang around a disaster area. This is show business. If the show flops, you close it. Onward and upward.”

AOL’s early CEO Jim Kimsey, who had long been enjoying his retirement, was even more direct, dialing Pittman up on the phone.

“Is this the unemployed Mr. Pittman? Because this is the unemployed Mr. Kimsey,” he greeted Pittman. “Congratulations–you moved Osama Bin Laden off the front page!”

But while Time Warnerites rejoiced in their hope that the merger turmoil was finally over, the company’s troubles wouldn’t leave the front pages for a long time to come.

We’ll see if that has changed at all, after Time Warner announces its second quarter earnings later today.

BoomTown Plea to Jeff Bewkes: Free Jon Miller!

Kara Swisher — Fri, 01 Aug 2008 23:41:43 +0000

Yesterday, in what feels to BoomTown to be a deeply petty move, Time Warner said that it had blocked former AOL head Jon Miller from being considered as a possible Yahoo board member.

The reason is a noncompete Miller (pictured here) signed, part of a severance agreement he reached with the media giant after it unceremoniously tossed him out in late 2006.

A Time Warner spokesman said Miller was barred from working “for a variety of competitors, including Yahoo, until March of 2009.”

Like it matters.

According to sources at Time Warner (TWX), the decision came from on high at corporate and not from the AOL unit. And it is not due to jealousy over attention Miller has received of late–Microsoft was also interested in hiring him to take over for departing exec Kevin Johnson.

Miller, sources said, was called by Time Warner CEO Jeff Bewkes (pictured here) last night and told by him, “We’ve changed our mind.”

Why?

Well, to be sure, Miller is no Time Warner favorite, even after being gone for almost two years.

But Miller, whom Time Warner and AOL execs never miss an opportunity to bash, off the record, is also no threat to AOL, which he actually helped revive from the ruins of the disastrous AOL-Time Warner merger.

While working on my second book about AOL in 2002, I will always remember visiting Miller at AOL HQ in Dulles, Va.–where he took up residence in former AOL exec Bob Pittman’s office–and finding him unusually calm after he got the thankless job of following Pittman and AOL icon Steve Case.

Time Warner forces, in the form of new CEO Dick Parsons, had finally managed to take back control of the company and–in a fit of misguided pique–brought holy hell down on the AOL unit.

It was a profoundly emotional reaction, which cost Time Warner precious years and much, much money, as the Internet business revived itself and AOL largely sat on the sidelines.

Miller was in the unenviable position of cleaning up the mess, while also having to listen to endless griping from his bosses.

And, despite the line being put out by Time Warner, he did a pretty good job.

While he might have dumped the dial-up business sooner and been more of an organized manager (the two big complaints about him), Miller did strike AOL’s lucrative Google search ad deal and also bought Advertising.com. (He also tried to buy YouTube, to no avail.)

That purchase should be reason enough for Time Warner to erect a small altar to him, given that it is one of AOL’s only truly valuable assets and the reason Microsoft (MSFT) and Yahoo (YHOO) have been interested in possibly buying the unit.

But no.

Instead, there is the usual he-said-she-said wrangling about whether Miller got approval for being let out of the noncompete clause.

Time Warner apparently claims Miller never got an official waiver, and Miller forces say Bewkes okayed the issue weeks ago, when it was first announced that Miller was one of the board picks being put forth by activist investor Carl Icahn.

It defies belief to go with Time Warner version, given everyone and their mother’s mother knew Miller was the likely pick of both Icahn and, especially, Yahoo CEO Jerry Yang.

More interesting is why Time Warner would choose to speak now, especially on the day of Yahoo’s board meeting.

At the meeting, the Yahoo board approved expanding its number of directors from 9 to 11 and formally voted to let Icahn take over the seat being vacated by Robert Kotick.

Miller was the shoo-in, with other likely choices. including former Nextel (S) exec John Chapple, media exec Frank Biondi and former Grey Global Advertising head Edward Meyer.

Perhaps Bewkes imagines somehow that Miller will be a leverage point in talks Time Warner has been having with Yahoo to be acquired. But the smooth exec is an expert negotiator and that seems unlikely.

More likely is that those talks, like AOL’s talks with Microsoft, have gone a little cold of late as everyone shuts up and stops making ill-conceived moves, to show Wall Street that they have their forward-leaning Internet strategies figured out.

No one does. Not Yahoo. Not Microsoft. And, most definitely, not Time Warner’s AOL.

That’s why Bewkes should stop the saber-rattling and free Miller to serve on the Yahoo board.

Yahoo could benefit and, as it stands now, Time Warner just looks silly–it does not want Miller, but it doesn’t want anyone else to have him.

My three-year-old knows how to share better than that.

BoomTown Decodes Carl Icahn's Latest Letter to Yahoo (The Crazy Eddie Edition)

Kara Swisher — Wed, 04 Jun 2008 23:19:30 +0000

Break out the sedatives, because Carl Icahn is getting mighty tetchy with Yahoo CEO Jerry Yang and the board of directors of the troubled Internet company!

In yet another letter to Yahoo Chairman Roy Bostock, the ever-grumpier billionaire investor, who is waging a proxy fight against Yahoo (YHOO) and seeking to oust Yang and crew, stepped up the volume to Crazy Eddie levels today.

It’s almost too juicy to require translation, as the veins practically pop out in Icahn’s letter from all the agita he seems to be experiencing over this botched takeover.

Icahn writes: Dear Mr. Bostock:

I have long been cynical about the effectiveness of many of the boards and CEOs in this country and as a result the inability of our companies to compete.

I have constantly complained about how far CEOs and boards will go in order to retain their jobs, yet even I am amazed at the length Jerry Yang and the Yahoo board have gone to in order to entrench their positions and keep shareholders from deciding if they wished to sell to Microsoft.

Translation: And I thought Dick Parsons of Time Warner (TWX) was a potted plant! But you guys make him look like the Road Runner, which is a very nice Warner Bros. brand, I might add.

Icahn wrote: According to details in a complaint that I became aware of yesterday (details Yahoo fought to keep under seal), Jerry Yang and a majority of the board went to inordinate lengths to sabotage a Microsoft bid.

The complaint states: “Viewing employee retention as Microsoft’s Achilles heel, Yang engineered an ingenious defense creating huge incentives for a massive employee walkout in the aftermath of a change in control. The plan gives each of Yahoo’s 14,000 full-time employees the right to quit his or her job and pocket generous termination benefits at any time during the two years following a takeover, by claiming a ‘substantive adverse alteration’ in job duties or responsibilities.”

The damage to Microsoft “is compounded by the fact that Yahoo’s thousands of engineers, known as ‘Technical Yahoos!,’ have detailed job responsibilities and qualifications.”

Translation: I am playing brain dead here, even though everyone and their grandmother knew exactly what Yang was doing at the time with that massive and costly severance plan.

But, with a little verbal foot-stamping and some grumbly sounds, I think it approximates an appropriately hysterical level of outrage and surprise.

Icahn wrote: Most importantly, Microsoft might never be able to trust a CEO and board who, while claiming to be negotiating in good faith, went behind their back and adopted a “plan,” which not only sabotages any Microsoft acquisition but went so far as to completely disable its own ability to rescind the “plan” as long as Microsoft’s offer remains pending.

Until now, I naively believed that self-destructive doomsday machines were fictional devices found only in James Bond movies. I never believed that anyone would actually create and activate one in real life. I guess I never knew about Yang and the Yahoo Board.

In my opinion, it will be extremely difficult for Microsoft or other companies to trust, work with and negotiate with a company that would go to these lengths.

Translation: Outrage! Foot-stamping! Grumbling! Acting like the once-thuggish Microsoft (MSFT) doesn’t actually admire this tactic by Yahoo in its secret heart of hearts.

And now, the piece de resistance, I compare Yang to Ernst Stavro Blofeld, as translated by Mike Myers’ Dr. Evil (One millllllliiiiioooooon dollars!).

What next from you evil-doers? A shark with a nuclear bomb attached in my lap pool? Painting me all gold and purple? Perhaps suspending me and a lovely disposable Bond girl high above a tank of piranhas?

But I am 0000000007, a billionaire’s secret agent number, so bring it on!

Icahn wrote: It is insulting to shareholders that Yahoo for the last month has told us that they are quite willing to negotiate a sale of the company to Microsoft and cannot understand why Microsoft has walked away.

However, the board conveniently neglected to inform shareholders about the magnitude of the plan it installed which made it practically impossible for Microsoft to stay at the bargaining table.

Could this have been the problem?

Translation: I like the silly focus on “the plan,” don’t you? It sounds so sneaky and naughty.

Even though, truth be told, Microsoft’s Steve Ballmer has publicly pointed to the ad outsourcing deal with its archrival Google (GOOG) that Yahoo is considering, as well as the price it is willing to pay, as the software giant’s main deal blockers.

Icahn writes: Even more deceitful are Yahoo’s actions toward its own employees, for whom you claimed to have set up the “plan.”

Management neglected to mention to these same employees that Microsoft in its proposals had earmarked $1.5 billion of retention incentives (representing over $100,000 per employee) meant to allay any employee concerns.

Translation: Again, “The Plan” sounds spooky, doesn’t it? M. Night Shyamalan is set to make a movie of it, just like “The Sixth Sense.” The tag line: “I see overcompensated geeks!”

Icahn wrote: Ironically, according to the complaint, this is not the first time that Yahoo has denied shareholders the opportunity of selling to Microsoft at a large premium.

According to the complaint, in January 2007 Microsoft offered to purchase Yahoo at $40 per share, but the company rejected that proposal.

On January 31, 2008, Steve Ballmer emailed a letter to Jerry Yang and Roy Bostock making a new proposal of $31 per share.

The letter recounts Microsoft’s prior efforts to acquire Yahoo and noted that Microsoft had given Yahoo time to implement business strategies designed to turn the company around.

These strategies obviously didn’t work.

The letter went on to state: “Our proposal represents a 62% premium above the closing price of Yahoo common stock of $19.18 on January 31, 2008.”

Yahoo not only turned down this proposal, but sabotaged it.

An article in CNET News cited in the complaint sums it up by stating, “Yahoo may indeed agree to Microsoft’s [offer], but it will be over Jerry Yang’s dead body.”

Translation: Dead bodies! I smell a hit movie! Hello, Oscar!

I wonder if Michael Douglas should play me again?

Greed, by the way: Still good!

Wait, I am being distracted from the issue at hand, which is: Was the board and former CEO Terry Semel high not to accept that $40 a share last year?

Smoking, I might add, is very bad for your health.

Icahn wrote: I and many of your shareholders believe that the only way to salvage Yahoo in the long, if not short run, is to merge with Microsoft. However, because of HSR considerations, to complete a merger of this magnitude will take a period of time.

Even if by some stretch of the imagination the Yahoo board finally determines to do the rational thing and sell the company, I fear that, in light of Yang and the board’s recent actions in response to Microsoft’s overtures, it may be too late to convince Microsoft to trust Yang and the current board to run the company during that period while Microsoft sits on the sidelines with $45 billion at risk.

Therefore, the best chance to bring Microsoft and Yahoo together is to replace Yang and the current Yahoo board with a board that will negotiate in good faith with Microsoft and in whom Microsoft will have trust to operate the company during the long period between signing and closing.

Translation: Please step down now! No? Pretty please? (It was worth the try.)

Of course, Microsoft trusts me less than you to run the place, but let’s leave that pertinent point aside here, shall we?

Icahn wrote: You stated in a press release yesterday that, “Yahoo’s board of directors, including Jerry Yang, has been crystal clear that it would consider any proposal by Microsoft that was in the best interests of its shareholders.”

However, this is not crystal clear to me. You have allegedly turned down a $40 offer. You have turned down and sabotaged a $33 offer. Instead, you appear willing to negotiate an “alternative” deal that, in my opinion, will be worth less than $33, but will entrench the board and Jerry Yang.

I understand how these actions are in the best interests of management and a board whose members each receive $40,000 per month for several days work, but it is hard for me to understand how these actions are in the “best interests of the shareholders.”

Translation: To make my point, let me channel Jack Nicholson in “A Few Good Men” here, with me playing Jack and Yang Tom Cruise:

Icahn: Ever served in a forward area?

Yang: No sir.

Icahn: Ever put your life in another man’s hands, ask him to put his life in yours?

Yang: No sir.

Icahn: We follow orders, son. We follow orders or people die. It’s that simple. Are we clear?

Yang: Yes sir.

Icahn: Are we clear?

Yang: Crystal.

Icahn wrote: However, despite your actions to date, there is still some possibility that you can resuscitate a Microsoft offer for the company.

The board can rescind the “severance plan” that is the largest impediment to a Microsoft deal. You currently can do this, because Microsoft withdrew their bid 30 days ago.

It is time for you to stop misleading your shareholders with respect to Microsoft.

It has been reported today that when asked to talk about the Microsoft bid, [Yahoo President] Sue Decker indicated that Microsoft made an offer which Yahoo’s board didn’t feel was at an attractive enough price.

However, one doesn’t have to be a rocket scientist to realize there is a simple method to possibly achieve a higher price.

Simply rescind the poison pill “severance plan,” which would free up approximately $2.4 billion and possibly even more which could be added to the bid.

It is also time to admit to your shareholders that the severance plan was not done for your employees (who you conveniently neglected to inform that Microsoft had earmarked $1.5 billion in retention incentives for), but rather was done simply as an entrenchment device and to impede a Microsoft bid.

If you are not completely disingenuous in your protestations concerning doing “the right thing” for shareholders, you should rescind the severance plan expeditiously and determine if Microsoft is still willing to purchase our company and thereby create a true competitor for Google.

I can only hope that you will finally do what is in the “best interests of the shareholders.”

Translation: My “plan” is to say “the plan” as much as possible, until I drive everyone nuts and take their eye off the ball, which is getting more money for me in this digital briar patch, as the only “shareholder” that I actually care about.

I threw in the “one doesn’t have to be a rocket scientist” dig, because I am not one in any way whatsoever and still have my secretary print out my emails.

By the way, what is this Facebook thingamajig people keep talking about as another Microsoft target? Do you have to be a rocket scientist to join it?

Icahn wrote: Sincerely yours,

CARL C. ICAHN

Translation: Still as insincere as ever!

A History Lesson for Jerry Yang: It Sticks in My Craw(ford)

Kara Swisher — Tue, 06 May 2008 09:34:41 +0000

Yesterday, the powerful portfolio manager at Yahoo’s largest investor, Gordon Crawford (pictured here) of Capital Research Global Investors, a division of Capital Research & Management Co., made some very public and very harsh remarks directed at Yahoo (YHOO) CEO Jerry Yang for blowing the Microsoft (MSFT) deal.

All told, between two funds, Capital Research owns 16% of Yahoo. The fund run by Crawford, a legendary money manager and media power broker, holds 6% of that total. No surprise, then, that those funds took a big hit yesterday after the Microsoft takeover bid for Yahoo collapsed.

So a lot of people paid attention yesterday when Crawford, in a high-profile interview with The Wall Street Journal, laid into Yang (pictured here) in such an in-your-face manner.

Said Crawford: “I’m extremely disappointed in Jerry Yang. I think he overplayed a weak hand.”

Crawford was fuming even more to the New York Times yesterday:

“I am extremely angry at Jerry Yang and at the so-called independent board. … I’m hoping that there is such an outpouring of outrage that the board is embarrassed into revisiting this thing, but I’m not optimistic about that.”

Uh-oh, because BoomTown has seen this story before.

It was back in 2002 and the exec under Crawford’s withering gaze then was former AOL Time Warner (TWX) Chairman Steve Case (pictured here).

Jerry Yang might want to take notes, as the situations are a little too familiar to ignore.

Thus, here is a longish excerpt from my book, “There Must Be a Pony In Here Somewhere,” which shows just how active and relentless Crawford can be as an investor when he gets irked by execs who disappoint him:

Gordon Crawford was still very, very angry.

Still piqued over the deteriorating situation at AOL Time Warner, he was now annoyed at himself too.

After laying into AOL Time Warner CFO Wayne Pace in early 2002 over what he perceived was dissembling by COO Bob Pittman and former CFO Mike Kelly in 2001, the powerful media investor at Capital Research and Management had decided over the spring to continue investing in the company.

He had visited the online unit and been heartened that executives were hard at work on a solution, even as the other divisions of the company were excelling and new CEO Dick Parsons had boosted morale.

Crawford calculated that the stock price had fallen well below the potential breakup value of the various parts of the company, and he had decided the stock of AOL Time Warner was being beaten down unnecessarily.

It now seemed a good buy. After all, how much worse could things get?

A lot, actually, as the online unit continued its downward spiral with new accounting allegations revealed over the summer and more signs that both subscriber numbers and ad revenue were in trouble.

Crawford would later kick himself for ignoring the signs he had flagged earlier.

“When there was one cockroach, one should always assume there are others,” said Crawford to me in 2003. “It was a stupid mistake.”

And Crawford wasn’t going to make another one, especially after he began hearing more and more angry voices from his network of sources across the divisions of AOL Time Warner.

Almost all the complaints were centered on one person: Steve Case.

After Levin and Pittman had left, it seemed, Case had begun to reassert himself at the company, visiting various divisions and doling out guidance on how to better achieve synergies.

It was advice that few divisional executives welcomed, especially coming from the man they held most responsible for the huge declines in the company fortunes, and who was also a constant reminder of how Time Warner had been snookered.

“To have to sit there and listen to him was unbearable for them,” said Crawford. “His continued presence was taking a terrible toll on morale.”

As the protests mounted, Crawford took it upon himself to gather key allies among the big shareholders–beginning with Ted Turner, who had now soured on Case much in the same way he had on Levin.

Crawford then contacted Malone, who had wanted to stay neutral but agreed to hear them out in an August visit to Denver. There, Crawford and Turner made their argument to Malone.

“Their view was that it was a disaster and no one could stand to have Case around,” recalled Malone. “The numbers lost were just too big, so he had to go.”

Lingering in the background, noted Malone, was the sense that Case had outsmarted everyone at Time Warner, a fact that further grated on them.

Since Crawford was headed east to New York for a series of meetings at various media concerns, including AOL Time Warner, the trio decided that he would be the one to deliver the news that Case should go.

He first met with Dick Parsons and Wayne Pace on on other topics at the company’s Rockefeller Center headquarters. During the meeting, Case joined the group and invited Crawford to his office when he was done for a private talk.

Case might have reconsidered the invitation when he heard Crawford’s definitive message: Resign.

Outlining his feedback from employees, Crawford explained that neither he nor other major shareholders thought Case could be an effective chairman any longer.

Case, sources familiar with the conversation said, was shocked by Crawford’s frank assessment and began immediately to argue with him.

Crawford was stunned when Case told him AOL was fine before the merger announcement and that he had no responsibility at the company after the deal was done.

It was not his fault that the economy had tanked. It was not his fault that both Levin and Pittman had proved to be unsuccessful leaders. It was not his fault that the Internet boom had turned to bust.

Case told Crawford he was not leaving.

The meeting ended with Crawford deeply troubled over Case’s finger pointing at everyone but himself, and the casting of himself as victim.

The gall of it rankled the longtime investor, who expected people to take responsibility for their errors. Yet Case hadn’t made even a slight effort at any kind of apology, claiming he either was not in control or not responsible.

What Crawford couldn’t grasp was that Case had no intention of saying he was sorry when he was not. To Case, offering a mea culpa would have been dishonest.

In addition, he felt it was more useful to figure out what to do next than wallow in blame. This was vintage Case, a behavior of moving on and compartmentalizing failure that had served him well for so long.

Case felt he had little authority to do anything, but a lot of responsibility to get it right.

Case called Crawford soon after he returned to his California office. “How can we patch things up,” asked Case.

But Crawford’s message was the same: “We can’t.”

Still, in the same conversation, Case asked Crawford to discuss the situation further in person when he’d be in Los Angeles on a visit to Warner Bros. in September.

He and Crawford, along with AOL’s Donn Davis and Capital Research and Management’s David Siminoff, decided to have lunch at a private executive dining room at the film studio in Burbank.

Case was nervous as they sat down, and he quickly said that he wanted to find a way to return to a productive relationship with Crawford.

“What do I have to do to become friends again?” Case joked.

He noted that he cared deeply about AOL Time Warner and wanted to rebuild value.

But then he again asserted that the blame for the failed merger was not his, since he wasn’t the one running the show at either AOL or AOL Time Warner.

To Case, this made sense–there were a lot of mistakes to go around, but all that mattered was where the company was now and what it should do to fix matters.

Case had no idea how badly he had misread Crawford, who wanted neither a friend nor excuses about leadership deficiencies nor lessons about the here and now.

Crawford understood that executives made mistakes, and he even thought it was OK to miss numbers—as long as you had the guts to admit that it was your fault and you didn’t point fingers.

Crawford told Case that he didn’t hate him and didn’t want to be accused of going behind Case’s back to get what he wanted as a major investor, as he began to talk to AOL Time Warner board members and shareholders about his concerns.

Crawford didn’t have a whole lot to add to what he had previously said.

And that was: Resign.

Case didn’t have much to add to his prior response, either: He would not.

…Crawford had been calling major investors since the late summer. Already, Crawford had Turner, Malone and many others on his side, including some AOL Time Warner board members.

As 2003 dawned, he was not going away in his quest to unseat Case and he probably held sway of at least one-third of AOL Time Warner shareholders.

“Case was an irritant, especially in a managerial role,” said Crawford. “He hurt the esprit de corps–you can’t be the general when your troops want to shoot you in the back.”

Another person close to Crawford offered a more descriptive take on the media investor’s motivations.

“He did not do it to embarrass Steve,” said this person. “Steve was just a festering boil at AOL that needed to be cauterized and removed.”

Note: Case resigned on Jan. 12, 2003.

Bewkes Job No. 1: No More Stumble-Bumbling With AOL

Kara Swisher — Thu, 08 Nov 2007 07:05:52 +0000

As expected, from a story we broke in BoomTown more than a week ago, AOL confirmed it has bought the Israeli content-targeting ad network Quigo.

The sale price, said sources, was a lofty $300 million, around what Yahoo paid for data analytics ad network BlueLithium in September.

Well, it’s probably a good thing for AOL as it tries to turn itself from the onetime online digital home for consumers to what amounts to a glorified ad network.

That’s probably a good idea, given that the service has lost about one-third of its paying subscribers this year, which is no surprise after it went free. AOL now has just over 10 million, but is banking less on them than on selling ads all over the Web for its future.

Still, as sites like Facebook and others add users to their services, it is also more than a little depressing to me, given AOL’s history of pioneering the idea of a robust Internet community, where users created what former AOL top exec Ted Leonsis used to call a “permanent online presence.”

At the time of the merger between AOL and Time Warner at the turn of the century, AOL had more than 30 million such users, an audience that was bound to decline, given the lack of ability to take advantage of many opportunities for the company over the years.

I have always likened Time Warner’s handling of its AOL subsidiary–which I think comes a bit from its lingering corporate rage over the disastrous merger–to watching someone fall down stairs very slowly and deliberately.

At first you feel bad, and then you’re simply annoyed at the sheer waste of a once-great brand.

For example, it never built an ad network of its own (although former CEO Jon Miller’s purchase of Advertising.com was a lifesaver); it never spun the service off when it could have benefited from being on its own in terms of innovation; and it never made the kind of key acquisitions that would have kept its features fresh for users and prevented an exodus.

In my second of two books about AOL, called “There Must Be a Pony in Here Somewhere,” I jokingly referred to Dick Parsons, who recently stepped down as CEO, as a “noncarbonated beverage,” whose greatest legacy at Time Warner will doubtlessly be steadying the situation at the company after the merger mess.

Well, that’s been a good thing, of course, but it has also meant a stultifying recent record for AOL in years that have seen a really substantive boom in the Internet space.

In fact, the only real corporate focus thus far seems to be on jobs cuts, which is fine, but not exactly what I would call a vision for the future.

Nonetheless, in his new job as Time Warner CEO, Jeff Bewkes (pictured here) still has a lot of opportunity going forward. The ad network is a good idea, as I said, but AOL faces a lot of competition in the arena from companies like Google, Yahoo and now Facebook and MySpace. And no slackers here.

And it is encouraging when AOL invests in interesting subsidiaries like Truveo and UserPlane, as well as holding a piece of content sites like TMZ.com.

Why not more focus on drastically improving its email and communications tools? Why doesn’t AOL double down in the fast-growing mobile market? And it still has great assets in pieces it owns like ICQ.

Even more interesting would be a spinoff of AOL or even a sale to a Yahoo or Microsoft, creating a more powerful entity in which Time Warner could own a big stake.

Incredibly, after horses that have left the barn at AOL, there is a lot AOL can be going forward.

The question is: Does Bewkes have some fizz in him to do it?

The Fruit Basket? It's From Carl Icahn, Sir.

John Paczkowski — Tue, 17 Jul 2007 19:35:24 +0000

The Googles of the world, they are the Custer of the modern world. We are the Sioux nation. They will lose this war if they go to war. The notion that the new kids on the block have taken over is a false notion.”

–Time Warner CEO Dick Parsons, May 9, 2007

Lousy historical analogies aside, Time Warner CEO Dick Parsons’s ill-conceived comment on the current media landscape was in some ways an apt one. After all, one could say that Time Warner has long been an organization with “too many chiefs and not enough Indians.” Too many working parts, too, according to some who’d like to see the company sell off a few, before Google and Co. commandeers its primary advertising supply and forces it onto a reservation on the south bank of the Missouri.

In a note to clients this morning, Pali Research analyst Richard Greenfield said that the time has come to break Time Warner apart. “It is time for the complexity of Time Warner to come to an end,” Greenfield wrote, suggesting the company consider divesting itself of ts publishing segment or AOL, which Greenfield describes as “unfixed.” “We believe the board and management have had long enough and must act over the next 12 months to radically reshape Time Warner–with its upcoming board (late July) likely to begin laying the groundwork for change,” he continued. “The synergy between Time Warner’s divisions is limited at best; sometimes even creating the risk of destroying value at one division to help another.”

Interesting, eh? Maybe Carl Icahn, the billionaire financier who unsuccessfully tried to force a breakup of Time Warner last year, didn’t misread shareholder sentiment so much as act on it prematurely. Makes you wonder what the topic of conversation was when Parsons and his top deputy, Jeff Bewkes, lunched with Yahoo chairman and former CEO Terry Semel at Allen & Co.’s Sun Valley media and technology conference last week.

The Fruit Basket? It's From Carl Icahn, Sir.

John Paczkowski — Tue, 17 Jul 2007 19:35:24 +0000

The Googles of the world, they are the Custer of the modern world. We are the Sioux nation. They will lose this war if they go to war. The notion that the new kids on the block have taken over is a false notion.”

–Time Warner CEO Dick Parsons, May 9, 2007

Well, That Was $71 Million Well Spent … Time to Sell Off Some More of That Google Stock

John Paczkowski — Fri, 08 Jun 2007 23:28:32 +0000

[ See post to watch video ]

Are You There God? It's Me, AOL.

John Paczkowski — Fri, 08 Jun 2007 12:37:59 +0000

Former AOL CEO Jonathan Miller did a lousy job of divining his future at the world’s largest Internet service provider, but he might not have been so bad at envisioning AOL’s. In October 2006, Miller intimated that Time Warner would consider divesting itself of the service provider. He was sacked a few weeks later.

Apparently, it wasn’t AOL’s future that was in doubt. At least at that particular moment. Because, as we all know, AOL’s future is always in doubt. Indeed, speaking at a Merrill Lynch media investor conference in London yesterday, Time Warner Chairman and CEO Dick Parsons said the company expects to make a decision on AOL’s fate before 2008. “By the end of this year we can make the call on AOL [on whether] we have found a business model or approach that can result in sustainable growth over time,” he told conference attendees.

Interesting, yeah? Parsons’s comment will no doubt fuel further speculation that the company might spin off a portion of AOL, as it did with Time Warner Cable, or merge it with another Internet property.

One last thing to leave you with here. Asked about Time Warner’s push into digital, Parsons said there’s a lot of work left to do to complete the transition to online. Then he offered this telling quote: “I’m going to say something I shouldn’t say. I worry about CNN more now than I do about CNN.com.“

Bury Your Heart at Wounded Knee, eh Dick?

John Paczkowski — Thu, 10 May 2007 00:58:27 +0000

Historical analogies sure are tricky, aren’t they? Just ask Time Warner CEO Dick Parsons, who ran afoul of one during a panel discussion at the National Cable & Telecommunications Association conference today. Commenting on the piracy issues facing traditional media in the digital age, Parsons compared the fight over copyright protections in the U.S. to the Battle of the Little Bighorn. “The Googles of the world are the Custers of the modern world, and we are the Sioux nation,” Parsons said. “At the end of the day, they lose this war if they go to war, and they know that.”

I don’t know, do they? I wouldn’t be so sure–not after their response to the Viacom suit. And more to the point, isn’t Parsons forgetting something? Like the deplorable fate of the Sioux Nation?