Time Warner Under Pressure to Spin Off Cable Unit
A group of outside investors headed by "corporate raider" Carl Icahn are pressuring Time Warner to spin off its cable-TV holdings. Because the "dot.com" stock market crash and ill-fated AOL-Time Warner erased nearly $200 billion in value of Time Warner's stock, the Icahn group believes that spinning off the company's cable holdings would enhance Time Warner's value on Wall Street.
Icahn and three investment firms also want Time Warner to buy back $20 billion of its own stock and elect new and independent board members. The Icahn-led group own $2.2 billion (or 2.6%) of Time Warner stock.
Time Warner has responded by increasing its stock buy-back program from $5 billion to $12.5 billion and selling 16 percent of Time Warner Cable. The cable unit is worth about $30 billion. For the first 9 months of 2005, the cable unit reported $7 billion in revenue and $1.4 billion in operating income. In the third quarter, Time Warner Cable experienced a 15% ($274 million) increase in revenue and a 17% ($74 million) increase in operating income.
CWA and IBEW are concerned about company governance issues (accounting practices and high level of executive compensation), as well as the proxy fight, and planning a meeting with Time Warner's Board Director.
