Tempus fugit without Warner

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March 4, 1989: Time Inc. and Warner Communications announce their merger, "a perfect fit" that they say "positions the combined companies ideally to capitalize on emerging technologies, new delivery systems and growing markets." Financial advisers on this smashing combination? Wasserstein Perella (along with Shearson Lehman) for Time and Lazard Freres for Warner.

Feb. 7, 2006: Carl Icahn issues a 343-page manifesto from his adviser on why Time Warner should be busted up. Carl's counsel? Wasserstein (as in Bruce) and Lazard (as in the investment bank Bruce now runs).

Bruce Wasserstein may finally have the story right: The purported synergy was mostly hype, and the best hope may be to split into four standalone companies-movies/TV, Time Warner Cable, Time Inc., AOL.

The big troubles began after AOL bought the place early this decade (a "strategic merger of equals to create the world's first fully integrated media and communications company for the Internet Century," according to the press release). In that release, Time Warner's Dick Parsons-now the CEO-said, "This is a defining event for Time Warner and America Online as well as a pivotal moment in the unfolding of the Internet age." True enough, since the bubble burst before the deal was done and Time Warner has spent most of the Internet Century trying to fix AOL.

Investors could wait for Mr. Parsons' full fix-it plan, which includes share buybacks and a partial split off of Time Warner Cable. But the stock hasn't been above $20 since the day after he got the job four years ago. Mr. Icahn pitches a plan-breakup, whack overhead, borrow billions to buy back more stock-that he says could be worth as much as $26 a share.

The plan carries lots of assumptions, such as the ability to slash corporate overhead from $450 million to $100 million. We make no assumptions about Mr. Icahn intending to be a long-term investor. But there is strategic logic: A breakup would create four companies with the brands, focus and scale to compete in distinct media markets. Mr. Icahn's proposal deserves a fair hearing. For Time Warner, it may be time to split.

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