Icahn's Overwrought Time Warner Assault

First off, one should mention that Jeff Bewkes, Time Warner's No. 2 guy and the former head of HBO, was vocally against the AOL deal. So Icahn realizes that if Parsons leaves, the stock will get a bump purely on the basis of Bewkes's former stance on AOL.

However, let's be realistic. Parsons never would have become CEO if he had opposed the deal. Parsons played the politics masterfully; forming bonds with Levin, Pittman, Case and Turner, throughout this process, and then ousting each one of them while never claiming to have political ambitions for the throne. And since becoming CEO he's reduced debt, simplified the capital structure, and in my opinion, turned around AOL.

The New Headquarters

Personally, I'm glad they did it. I hate the statue that's right between the escalators going up to the Borders bookstore but I love the bookstore and the food in the Mandarin is great. Keep it up!

Every division of Time Warner is now undervalued compared with its peers. Filmed entertainment, including Warner Brothers and NewLine, is going strong and there are more Batman and Harry Potter movies coming out, among others. And yet, Time Warner's stock trades at 10 times EBITDA, and pure plays like Pixar and Lion's Gate are at 15 times and 23 time respectively.

Cable, if it represented the entire business at 10 times EBITDA, is cheaper than Comcast(CMCSA Quote), which trades at 11.5 times, and Cablevision(CVC Quote) at 19 times.

I am a big fan of the Networks division, having formerly worked at HBO (and met my wife there). And finally, AOL is a rough gem that is starting to shine. Although subscription revenue is going down, Parsons has been orchestrating a soft landing while turning around the advertising revenue.

Overall net income is up, climbing to $692 million in the six months ending June 30, 2005, from $553 million in the six months ending June 30, 2004. AOL, with a TWX multiple, is trading at one-third or less the multiples of Yahoo!(YHOO Quote), Google(GOOG Quote), or even Internet laggards like cNet(CNET Quote).