Tuesdays With Carl

Fishbowl is coming to you not-quite-live tonight with the play-by-play of this afternoon's Lazard Freres/Carl Icahn press conference held on the 20th floor of the St. Regis where the ballroom is so vast that the WiFi signal is spotty at best. Here's the best reconstruction we could type on the train ride home. (Just a warning: quotes are not quite transcipt-accurate either. For a precise recap, check out the Webcast of the press conference here.) 3:28 p.m. A steady stream of suits are piling into the St. Regis on 55th St., where a pair of satellite trucks are parked and cameramen are already shooting sidewalk b-roll in preparation of the evening news. Upstairs, it's a sea of ibankers, analysts and miscellaneous financial types with seemingly only a smattering of actual press at this press conference, plus the TV cameras in the back. I sit down next to an open-collared analyst who might be the only man in the place (and out of several hundred attendees present, the crowd might still be 90% men) not wearing a jacket. But he's already too engrossed in the press release and full Lazard report we were handed on the way in. He's on the phone to the office, scribbling and circling figures and no doubt someone is massaging a spreadsheet on the other end. Icahn walks by and glad-hands Ken Auletta (speak of the devil) who happens to be sitting two rows in front of me and two seats away from Michael Wolff (they're separated by another man I can't recognize from behind). Icahn (who will be played in the movie by Mel Brooks) looks like a man running for office, which he is, and these are no doubt his constituents. He walks to the table at the front of the room, where he's seated on the far right. Frank Biondi, the former Viacom CEO he's tabbed as his replacement CEO for Dick Parsons, is on the far left. And seated in the middle perhaps reflecting his centrality to this deal, and the fact that he's the host of this conference is Bruce Wasserstein, who in the last week has had to oversee the creation of this report, grieve over the death of his sister, Wendy Wasserstein, and become the guardian of her effectively orphaned child. (Absolutely not in that order, of course.) The press conference after the jump... 3:34 p.m. Wasserstein steps to the podium, and we are underway. "We very much appreciated you being here for a brief review of the Lazard report," he says, and it will certainly have to be brief, given that the report is 343 pages long and not even the quants in the audience want to dig through the entire thing right now. The bullet point version of his opening remarks: Time Warner has been managed for the short term. This has cost the shareholders at least $40 billion And the stock has underperformed just about everything Time Warner's competitors in the individual fields of each of its businesses, the indexes, and even an index comprised of its competitors. It's a sweeping indictment. 3:37 p.m. But he'd like you to know that he and Lazard are no yes-men. Their goal, he says, was to create long term shareholder value, not necessarily manufacture statistical support for Icahn's aims. "Our conclusion would have been the same had we been employed by the board of Time Warner," which is certainly ironic considering how hard Wasserstein fought for some credit in the AOL-Time Warner merger. 3:40 p.m. "What then, is the problem?" Wasserstein asks. Oh, everything. "Overreacting to short term market nervousness." "Turnover in the executive suite." Is he saying they should have kept Jerry Levin? Or Bob Pittman? The laundry list of near-fatal mistakes goes on, beginning with the decision to pare back debt (at a time when the stock price was supposedly getting hammered because of all the debt) during an era of easy money on Wall Street, which led the company to underinvest in its assets, leading to all sorts of disasters. 3:43 p.m. "Almost every strategic decision regarding AOL has been wrong." Time Warner management ran it as a cash cow, then threw up "the so-called 'walled garden.' This was a result of Time Warner simply wanting to maximize the short term earnings," and which left it easy prey for Google, Yahoo and Barry Diller's IAC, which all "secured powerful market positions. 3:48 p.m. "So what do we recommend?" That Time Warner be broken up into four companies publishing, cable, entertainment and AOL. "There is no compelling reason today for these business to remain together. Time Warner cannot point to any superior and demonstrable synergies. There are actually significant dis-synergies." And just like that, we have our first media buzzword of 2006. All four companies would have their own strategy, would appeal to a different set of investors (hopefully realizing greater value) and most important of all: would be able to take on more debt. It's at this point which Wasserstein also adds that "significant cost cuts are possible," and that cost cutting on the scale of what Edgar Bronfman Jr. did to Warner Music after he bought it off Time Warner, plus $20 billion in share buybacks, "sets the stage for delivering value to shareholders." I don't like where this is headed... 3:51: Wasserstein caps off his opening remarks with the annoucement that his firm's fees are pegged directly to the performance of Time Warner stock over the next 18 months. "If Dick Parsons indeed has the secret super-spicy sauce to drive and deliver greater value," he says, smiling impishly, "we all say, hallelujah and God bless." Then he adds, almost under his breath, "By the way, if you can all repeat that rapidly: 'secretsuperspicy sauce...'" The owl-faced bankers in the room barely crack smiles. So Wasserstein and Lazard get paid either way. Yes, he definitely deserves to have the middle seat at that table. This is starting to sound like a mugging all right if Wasserstein is effectively holding a gun to Dick Parsons' head with his firm's report and its conclusions, then just how much does it matter whether Carl Icahn robs him of his wallet, or whether Parsons gives him the money himself by speeding up the pace of divestments a little bit? 3:53 p.m. It's Frank Biondi's turn. He looks like he's having some sort of flashback up at the podium. "All I can say is, life is strange, folks. I feel like I'm out there in 1994... I see so many of the same faces..." As if he needs to somehow underscore the principle of eternal recurrence in the media industry. Biondi was once booted out of the top job at Viacom because Sumner Redstone has a vampiric tendency to eat his own successors. (It keeps him young, obviously.) Now here he was, perhaps about to be swept back into power because his brother Michael happens to work for Wasserstein at Lazard, and because he has a very nice resume. 3:55 p.m. "I fully concur with both the [report's] analysis and its conclusions," Biondi says. As he continues in that vein, it's clear that even if Wasserstein was telling the truth that he would have delivered this report to Time Warner's board -- then it's equally clear that Biondi will be reading straight from Lazard's playbook, no questions asked. 3:57 p.m. Finally, it's Icahn's turn. "I'm a back of the envelope kind of guy. I look for obvious no-brainers, and I call them. We look for the disconnect between a stock's value and stock's worth," and he goes on to tell a rambling story about one of his raids on tobacco and foods giant RJ Reynolds back in the day, inadvertantly proving perhaps once and for all that this is a man with no illusions about the cultural superiority of the media business an antimogul, if you will, borrowing Michael Wolff's conception of how moguls think and behave. 4:01 p.m. He quotes Parsons about not knowing where the media future lies, and that's why he wants to hedge Time Warner's bets. "A great company, the leader in its fild, should not be reacting. But I do agree with Dick that he does not know where the future lies." Zing! 4:06 p.m. Now we're reaching the heart of darkness. "There are so many men in this world who fall in love with something," Icahn says. "They fall in love with structures. They fall in love with beliefs. "There was this great movie, "The Bridge on the River Kwai." Alec Guiness plays this strong-willed leader. The Japanese capture his company... and the Japanese get him to build the bridge, and he falls in love with that bridge. And in the end, he's fighting his own people not to blow it up. "The Bridge on the River Kwai" is Dick Parsons and Columbus Circle." This draws big guffaws from the crowd. "That is the essence of Dick Parsons... Now I'm becoming a writer. I should be Ken Auletta..." And he's right. I can practically hear the ledes for the next wave of Parsons vs. Icahn stories being drafted all around me. "He's in love with the conglomerate structure. He's in love, really, with Columbus Circle. When you talk to Dick Parsons, he talkes more about the view from Columbus Circle than AOL. "The choice, to paraphrase Shakespeare, is that the fault will not be in our stars, but in ourselves. The time has come to lift the Columbus Circle fog and let the sun shine on our great assets. So I hope you'll be with us." And that concludes Icahn's contemporary adaptation of Julius Caesar. 4:34 p. m. I'll spare you the Q&A period except for one question, in which the future of the little people at Time Warner the rank-and-file journalists and programmers and salespeople and everyone else who are our brothers and sisters in the media business was revealed to be a bleak one. Someone in the crowd asks Biondi how one changes the corporate culture of a place like Time Warner, and Biondi begins a quiet rant. "There are island and they are indeed islands of 40 and 50 years of tradition. They do travel in first cabin at Time Warner. And the poster child of that, if you will, was Warner Records. I don't think the flaw was selling it I would have sold it, too... But they didn't get the cost structure reduced to realize the full value." It took Bronfman and his ruthless cutting to do that. The net result of today's presentation, I think, was to prove beyond a shadow of a doubt that the wolf is finally at Time Warner's door. The seeming contempt Biondi had for Time Warner (former) culture of contented meritocrats doing their thing, enjoying their perks is a sign for dark days ahead, especially for the folks at Time Inc. While the AOL deal led to everyone being bamboozled by Steve Case, Carl Icahn is not just out to dismember the company, but ultimately their day-to-day existence. Stay tuned.

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Tuesdays With Carl

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