Shakeup Shows Ross In Control of Leading Media-Entertainment Co.
NEW YORK (AP) _ The surprise departure of Time Warner Inc.’s second in command seems to signal that Chairman Steven J. Ross is firmly in charge of the global media- entertainment giant, despite persistent rumors about his health.
It also dramatizes the difficulties of sharing executive power and reflects lingering clashes in corporate culture stemming from the 1990 merger of Time Inc. and Warner Communications Inc.
On Wall Street, investors reacted positively to the change. Time Warner rose $1.87 1/2 a share to $99.75 in trading on the New York Stock Exchange.
Late Thursday, Time Warner announced that N.J. Nicholas Jr. had resigned as co-chief executive and president, replaced by vice chairman Gerald M. Levin, the company’s chief business strategist.
It was a bittersweet victory for Levin, who lost to Nicholas in the mid- 1980s in their unofficial rivalry for the presidency of Time.
Securities analysts praised the selection of Levin, saying it had become clear that the plans laid out at the time of the merger to make Nicholas sole chief executive in 1994 worried some company insiders and investors.
They said Levin is seen as a better long-range planner and worked hard to established a rapport with the company’s film and music constituencies, which were added to Time’s publishing and cable TV interests in the merger.
The choice also appeared to signal that the company endorsed Ross’ view of the strategic direction and was establishing a line of succession that would ensure it would continue on that path.
Ross, 64, has been undergoing treatment for prostate cancer and has been away from the office most of the time since December.
″People are concerned about Ross’ condition and this clearly indicates he is dealing from a position of strength,″ said Jessica Reif, media-industry analyst at Oppenheimer & Co., a Wall Street investment firm.
Ross and Levin were said by their offices to be unavailable for comment. Nicholas, reached while on a skiing vacation in Colorado with his family, declined to discuss his resignation.
Time Warner board member Henry Luce III said the board asked for Nicholas’ resignation on the request of Ross and Levin. He said the vote was not unanimous, but declined to what it was or how he voted.
He said Ross and Levin cited a number of reasons for their recommendation, but said the most important involved the $1 billion sale of a 12 1/2 percent stake in its entertainment division to Japan’s Toshiba Corp. and C. Itoh & Co.
Luce said Nicholas preferred a different strategic policy to reduce Time Warner’s multibillion dollar debt, favoring asset sales rather than selling a minority participation in some of the company’s businesses.
Time Warner has indicated it is pursuing similar deals elsewhere.
It also was reported that Ross and Nicholas had disagreed on a stock rights offering last year that ultimately generated $2.7 billion.
John Reidy, a media analyst at Smith Barney Upham Harris, said those were ″the two most important strategic decisions made″ since the merger.
The reported disputes also are seen as evidence of the culture clash between Time’s button-down approach and the free-wheeling style at Warner.
One-time Time executives are said to resent the enormous sums their counterparts at Warner received as a result of Time’s 1989 purchase of a majority interest in Warner as a prelude to the merger of the companies.
Ross himself received about $78 million in compensation in 1990, most of it stemming from his stock holdings, making him one of the world’s wealthiest corporate executives.
Robert Bontempo, who teaches management at the Columbia Business School in New York, said Ross and Nicholas were destined to fight for power.
″These kinds of co-executive share arrangements are inherently unstable. It sounds nice on paper but it doesn’t work in practice,″ he said.
In a statement released by the company, Nicholas was quoted as saying there was ″sufficient difference″ between him and the company’s board and management that ″my resignation should now enable a single and consistent view to prevail.″ He did not elaborate on the differences.
The combination of Time and Warner marked one of the most highly publicized marriages in the 1980s era of debt-financed corporate mergers and takeovers. It created a global giant with some of the best-known names in American publishing and entertainment, including Time and Sports Illustrated magazines, Warner Bros. films and the nation’s second biggest collection of cable TV systems.
The departure also comes as Time Warner’s financial fortunes appear to be rebounding. It has cut debt to $8.7 billion from $11 billion as a result of the stock rights offering. It recently posted the first quarterly profit since the merger.