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August 14, 2006

Carl Icahn increases Time Warner stake

Steve Rosenbush

Carl Icahn has increased the size of his stake in Time Warner, the media conglomerate that has frustrated him so much. The billionaire shareholder activist tried last winter to break Time Warner into four pieces, but he dropped his campaing in February after management agreed to boost its share buyback program and cut costs.
During the months that followed that truce, Icahn increased his holdings 8% to 49.6 million shares. The filing can be found here. It was reported earlier by CNN Money.

Why would Icahn boost his exposure to a company that has so clearly disappointed him? Icahn wasn't avaialble for comment on Monday. But I can think of only two explanations for his move. The first is that CEO Richard Parsons has satisfied Icahn's demands and Icahn is content with the result. That isn't likley. Time Warner shares have declined since February, while the shares of other media companies such as News Corp. have increased.

The other alternative is that Icahn believes the full value of Time Warner's assets remains obscured by its structure, and that sooner or later the market will force some sort of change that will unlock that value. Parsons bought himselt some time last February, but not all that much. If the company's shares are still stagnant by next winter, he will undoubtedly face another round of angry investors who want to break up the company. Fending them off may be more difficult the second time around, because his critics will be able to argue that investors have been more than fair and patient, and that management has failed halt the slide in the company's share price.

That's not to suggest that Time Warner management isn't trying. A flurry of changes, especially at its AOL unit, have been visible in recent weeks. A new AOL video offeirng is under way, and the company has been giving away email and other services that it once sold.

But it seems to me that Icahn's continuing purchase of Time Warner shares suggests that he anticipates some sort of event that will unlock Time Warner value.

03:16 PM


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