If the reaction from analysts on Wall Street is any indication, Carl Icahn’s quest to break up Time Warner in an attempt to jump-start the media giant’s flagging stock price faces an even steeper uphill climb than the billionaire financier might have figured.

In the days since investment firm Lazard unveiled its highly anticipated-and Icahn-commissioned-analysis of what it considers to be Time Warner’s missteps and offered a series of measures it believes could help improve Time Warner’s performance, the report has drawn more yawns than praise, leading many analysts to predict that Mr. Icahn’s efforts to overthrow the current Time Warner board face very long odds.

In many ways, Mr. Icahn and the Time Warner shareholders who are supporting him can blame themselves for that. Due to the heat Mr. Icahn has put on the company in recent months, Time Warner management appears to have gotten the message and has responded by stepping up efforts to boost the company’s stock price.

Among the moves taken in recent weeks is a sale of the company’s book publishing unit as well as a decision to increase the size of its stock repurchase program to $12.5 billion. Time Warner officials are also aggressively trying to improve the fortunes of the America Online unit, which for years suffered neglect amid poor strategic decisions and an accounting scandal that was finally resolved last year.

“Net-net, we view Mr. Icahn’s group as unlikely to succeed in replacing the current board,” said Merrill Lynch media analyst Jessica Reif Cohen. “However, the group has already been successful in getting the company to commit to further cost cuts and improvement in their capital structure through increased returns to shareholders. We would not be surprised if further moves to mitigate investor concern and drive the stock are forthcoming from management.”

Indeed, Banc of America Securities analyst Douglas Shapiro said Mr. Icahn’s efforts could still end up making him a hero of sorts, even if he doesn’t prevail in the proxy fight he has waged. Assuming the company keeps on its current path of buying back stock, examining its asset mix and trimming costs, “The Icahn group may lose the battle, but if the stock goes up, it will have won the war,” he said.

In its 371-page report, Lazard suggested that Time Warner break itself into four separately traded public companies-AOL, Time Warner Cable, publishing and a single film and TV network operation. In addition, Lazard recommends that jobs and overhead be cut and operations be streamlined and that the company increase the size of its stock-buyback program to $20 billion.



Biondi’s Blueprint

The report will serve as a blueprint for the future of the company should Mr. Icahn prevail in the proxy fight. Former Viacom CEO Frank Biondi has joined forces with Mr. Icahn and has agreed to become chairman and CEO of Time Warner should Mr. Icahn get his slate of nominees elected to the Time Warner board at the company’s annual meeting in May.

Mr. Biondi said following through with Lazard’s recommendations would be his top priority should he become CEO, and said he expects the company breakup to take somewhere between nine and 18 months, finishing by the end of 2007.

The report also outlines many of the problems the firm sees as plaguing Time Warner’s stock price, including missed opportunities to capitalize on America Online’s position as a leading Internet site, the network division’s failure to launch any new broadly targeted channels in the past three years and mistakes at Time Warner Cable, including the company’s loss to Comcast in the AT&T Broadband auction.

“Time Warner has been run for the short term [and has made] numerous contradictions and missteps,” said Bruce Wasserstein, chairman and CEO of Lazard. “There has been no coherent strategy and there has been a lack of conviction in the Internet [which has] limited its potential for growth and therefore [hindered] an increase in shareholder value.”

Time Warner, for its part, said in a statement: “Our board and management regularly review all of the strategic options for managing this company to create the greatest value for our shareholders.”

Some analysts have criticized the report as offering little in the way of new ideas, and some have complained the report fails to consider a raft of outside forces that have confronted Time Warner over the past five years.