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Give Icahn a Chance

Time Warner may be flush with talent, but that hasn't helped the stock.

This column was originally published on RealMoney on Jan. 31 at 10:33 a.m. EST. It's being republished as a bonus for readers.

"May I tell you that the people who work at Time Warner, though, the people in almost every division, with the possible exception of cable, are the envy of the industry? These are some of the best-run, best-milked properties on earth."


said Jim Cramer in his take on

Time Warner



Time Warner may be well managed. It may have good people. The content may be great. But why should shareholders care when the stock is doing nothing? Were I a Time Warner shareholder, I would be much happier with Dick Parsons running the show rather than the AOL cowboys of the late 1990's. But again, does management matter for a stock that does nothing?

Next week, activist investor Carl Icahn is set to unveil his restructuring plan for the stagnant media conglomerate. While some feel that Icahn is out of line and/or wasting his time, and should simply step aside, I think it is in the best interests of Time Warner shareholders to at least listen to the plan, which was crafted with the assistance of investment bank




My take on Time Warner is that the company is simply a slow-growing, complex giant. The product of numerous mergers and acquisitions, the company has hit the wall, which makes it extremely difficult to see it receiving any kind of valuation premium.

Are people simply in love with Time Warner the company, enough so that they don't care about the returns of Time Warner the stock? I don't think so. In this day and age, investors are more likely to say, "what have you done for me lately?" than "Oh, it's a great company, it will come around sooner or later." Anyhow, to investors, what constitutes a great company? One that sees its stock go up, or one that is deemed well managed? I'd argue the former.

So if the stock can't get moving, why not try something different, or even something extreme? Why should shareholders stand for the status quo when their stock is dead money?

After all, it is the shareholders who own the company, not Time Warner management. One can easily make the case that Carl Icahn does not care about the long-term viability of Time Warner and is only interested in making a few bucks for himself. But is that necessarily a bad thing?

Now any plan hatched by Carl Icahn must be closely scrutinized, down to the punctuation. But I feel it is just plain wrong to reject such a plan without seeing the details. At this point, what do Time Warner shareholders have to lose by listening to another point of view? When it comes down to it, if -- and I stress if -- Carl Icahn succeeds in getting Time Warner shares up to $25 or so, shareholders certainly won't be complaining about his supposedly uncouth behavior.

I strongly believe a healthy dose of shareholder activism delivered to corporate America can go a long way, provided it doesn't evolve into a craze similar to the scandal-ridden junk bond fiesta that marked the 1980's. When the media calls companies "well managed" or "blue chips," I believe shareholders should roll their eyes and focus on the numbers. Time Warner shares are up substantially from their 2002 lows, but since the end of 2003, are down slightly. So who cares if the company is well managed, whatever that's worth anyway.

In keeping with TSC's editorial policy, Michael Comeau doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Comeau performs stock analysis for



Stocks Under $10

. His market interests include consumer technology, retail, and small- and mid-cap financials. He appreciates your feedback;

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