Updated from 10 a.m.

Restive shareholder Carl Icahn turned up the heat on Time Warner ( TWX) on Tuesday, accusing the company of suffering from "the paralysis of inaction."

Icahn and his hedge fund buddies have begun accumulating the stock in hopes of shaking up the stagnant media giant, whose shares haven't moved in two years following a precipitous plunge in the aftermath of 2001's disastrous AOL-Time Warner merger.

Icahn's Tuesday statement took a more combative tone than his previous comments. He reiterated his demand that management, led by CEO Dick Parsons, fully spin off the company's cable arm and buy back $20 billion worth of stock. He also urged greater shareholder representation on the media giant's board.

"The Time Warner PR machine would like you to believe that Mr. Parsons and the Time Warner Board have been performing well and taking the necessary steps to deliver value for shareholders, and it appears that many in the press have accepted this storyline," Icahn wrote in a Tuesday letter to Time Warner shareholders. "But after taking a closer look at the years following the merger with AOL, it is clear that there have been a series of significant missteps by the Board and Time Warner's senior management which have resulted in the further destruction of value."

Time Warner replied that its board and execs have in recent years "have demonstrated their commitment to creating shareholder value, pursuing a strategy that focuses on creating sustainable long-term value in all our businesses while optimizing our capital allocation and leverage." Ever since Icahn began criticizing the company, Time Warner has stubbornly defended its plan to spin off 16% of the cable operation and to buy back as much as $5 billion worth of stock.

In addition to the universally mocked merger that created the company, Icahn lambasted the subscriber hemorrhage at AOL, the sale of Warner Music ( WMG) and Comedy Central at what he called "fire sale" prices, and the failure to acquire the MGM movie studio. He also took Time Warner to task for what he called its "bloated cost structure," including the recently erected Time Warner Center in midtown Manhattan.

"We question how such an extravagant building, which houses only a small fraction of Time Warner's employees, enhances shareholder value (and cannot help but wonder where the shareholders get to eat lunch)," Icahn pleaded. "Given this extravagance and the failure to cut costs at businesses like Warner Music described above, we intend to hire, in the next few weeks, an industry consultant to analyze and compare Time Warner's costs to its peers on a number of different levels to determine what other excess fat may lie in the Company's cost structure, including, but not limited to, perquisites afforded to the Board and top management."

Time Warner's statement focused on the company's progress, such as it is, in bouncing back from its postmerger blues. "During that period we greatly improved the financial health of the company by selling low-return businesses, reducing debt, stabilizing AOL, and made significant progress in resolving the company's legal challenges," Time Warner said. "All of these steps gave us the ability to enter into our pending Adelphia acquisition and institute a dividend and stock repurchase program."

The company said it was intent on accelerating "the transition of AOL's business model" and added that it would seek to "refine our capital allocation to drive increased returns, which could include consideration of increases in the dividend, share buyback, or both."

For the moment, Icahn's crusade hasn't won over some Time Warner investors.

Giri Cherukuri, senior trader at Oakbrook Investments, which owns 235,000 shares, surmises that Icahn has a "true lack of confidence in management and thinks he knows how to run the company." But he says Oakbrook is "leaning towards management, who we feel have done a reasonably good job." While he feels that the company has been a little late to the game on AOL, it is clearly focused on turning it around.

Arthur Pergament of Time Warner investor Pergament Advisors likes recent efforts to negotiate an AOL partnership with Microsoft ( MSFT). He says Parsons has been very clear about the priorities at Time Warner. "Shareholders always want things to move quicker," says Pergament, "but deals don't happen overnight."

On Tuesday, Time Warner fell 2 cents to $17.99.

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