This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Fog of Time Warner

The fog surrounding Time Warner (TWX) continues to thicken.

Just as the media giant and its peers were uniting Tuesday against the threat of regulatory action, activist shareholder Carl Icahn dropped his own bombshell, naming as his new brother-in-arms the hard-hitting Lazard banker Bruce Wasserstein.

Icahn's group, which controls 2.5% of Time Warner shares, hired Wasserstein to rummage through the trash bins outside 1 Columbus Circle and to choose a fantasy-league board slate. Icahn's displeasure with Time Warner stems from the company's stock, which has been frozen in the teens for more than three years since its well-chronicled plunge after the big AOL-Time Warner merger of 2001.

Icahn has demanded a full cable spinoff and a $20 billion stock buyback. Time Warner earlier this month agreed to meet him halfway on the buyback, raising its repurchase target to $12.5 billion from $5 billion, though the company hasn't changed its limited spinoff plans.

But some media investors doubt even a change atop Time Warner -- something that seems to be in no danger of taking place, given repeated promises to stay the course CEO Dick Parsons has charted -- would get the stock moving Icahn's way.

"The price of Time Warner is not being affected by management," says Larry Haverty of big shareholder Gabelli & Co. "It's really about external realities."

Haverty says those realities include low cable valuations and concerns about capital spending and free cash flow. The FCC's move Wednesday, which raises the prospect of an extended debate over the industry's pricing model, only adds to the morass.

One analyst strongly agrees. "Media and entertainment valuations are in the toilet," says the analyst, "What Icahn does or proposes isn't going to change anything. It hasn't worked for Viacom (VIA) or for Liberty (L). Investors are not unhappy with Time Warner management."

What Wall Street is unhappy with is that television advertising is declining in popularity, as a welter of cable channels and the four big broadcast networks fight off digitally equipped viewers looking to tune out ads altogether, and as the Internet becomes a more viable ad vehicle. Meanwhile subscriber growth has slowed for the big cable operators, and the prospect of trimming the average consumer's cable tab -- however remote -- is most distasteful to investors who have footed the bill for years of hefty capital spending at the likes of Comcast (CMCSA) and Cablevision (CVC).

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs