Time Warner Inc said on Monday Chief Executive Richard Parsons will step down on January 1 and be replaced by Chief Operating Officer Jeffrey Bewkes, stoking expectations that big changes lie ahead for the world's largest media company.

Bewkes, identified as Parsons' heir apparent since 2005, will take the helm of Time Warner at a time when investors are demanding drastic measures to boost its sluggish stock price, which has fallen back to about the same levels as when Parsons took over the company five years ago.

Some investors say that Bewkes, who had been an outspoken critic of the AOL-Time Warner merger, should seriously consider spinning off part or all of the Internet division, or sell off some or all of its holdings in Time Warner Cable.

I don't think there will be immediate impact to operations, although I do think that Jeff is less sentimental about the current structure of the company, Oppenheimer analyst Thomas Eagan said.

Whether that means he is more willing to spin off or sell publishing, for example, I think it means that he will be more driven by the results than by strategy, Eagan said.

Bewkes, 55, was elected CEO by the board, while Parsons, 59, will remain chairman, said Time Warner, owner of some of the world's top media brands including CNN, Time Inc, HBO and Warner Bros.

Shares of Time Warner were up 1 percent at $18.06, after hitting a high of $18.45, a 3 percent gain, earlier in the day. The stock is down about 18 percent this year, underperforming rivals such as News Corp and Walt Disney Co.

Gamco Investors Inc's Mario Gabelli, a Time Warner shareholder, expects Bewkes to look at strategy changes, such as a partnership between AOL and Yahoo Inc. He is in favor of the company retaining a major interest in AOL.

The once-mighty AOL online service has struggled to keep up with faster-moving Google Inc and Yahoo in recent years. AOL is expected to show another slow quarter of advertising sales when Time Warner reports results on Wednesday.


Clearly, something will occur, Gabelli told Reuters last week, before the widely expected announcement. New CEOs all do something new in the first couple of years.

For its part, Time Warner management has said the company has explored a wide range of options, including spinning off the 84 percent-owned cable division completely.

Bewkes joined HBO in 1979 when cable television was still in its infancy. He rose through the ranks and was named HBO's CEO by 1995, building the network from a second-run movie outlet into a developer of critically acclaimed original TV series such as The Sopranos and Sex and the City.

Analysts say Bewkes, who graduated from Yale and has an MBA from Stanford, combines financial savvy with a knack for managing creative talent. He is said to be results-driven, and will likely look closely at the financials of Time Warner's publishing and Internet units before taking any action.

Jeff is a well-respected business executive both inside and outside the Company. His results-oriented management style and deep industry knowledge will be invaluable as he drives growth at Time Warner, Parsons said in a statement.

As for Parsons, he has been praised for taming warring factions at the company after its disastrous $106 billion merger with AOL, which had ignited a spate of government investigations and a free-falling stock price.

The former lawyer's calm demeanor brought stability to Time Warner, though more recently, critics say he has not been fast enough in charting a new strategy for the conglomerate. Media reports of Parson's imminent departure boosted the stock nearly 4 percent on October 26.

I think that Dick Parsons was certainly the right guy to bring the company through the AOL merger, to keep the businesses intact, analyst Eagan said.

Technology is changing things faster today than it was back then, Eagan said. So whether it's how best to distribute their video content ... all those questions Jeff will more likely be able to capitalize on.

(Additional reporting by Michele Gershberg, Robert MacMillan, Paul Thomasch and Kenneth Li; Editing by Brian Moss)