Carl Icahn has called on Time Warner, the world’s largest media company, to break its empire up into four separate companies and make stock buybacks totalling about $20 billion. But analysts said the plan was not convincing enough to win the support of Wall Street.

The veteran corporate raider last night delivered the report he had commissioned from investment bank Lazard. It accused Dick Parsons, Time Warner’s chief executive, of underestimating the group’s financial capacity, missing market opportunities, failing to cut costs and under-investing in businesses, particularly the AOL internet unit.

The Lazard report comes as Mr Icahn steps up his efforts to elect an alternative group of directors at Time Warner’s shareholder vote in the spring. The investor, who speaks for about 3.2 per cent of the company, has so far struggled to gain popular support with his campaign.

"Time Warner has been managed for the short term," Bruce Wasserstein, the Lazard banker who prepared the 343-page dossier, told investors at a meeting in Manhattan yesterday. "This has damaged the company’s fundamental competitive position and its prospects for growth. This approach has cost shareholders a staggering $40 billion."

The rebel shareholders argued that splitting Time Warner into four separate publicly listed companies -- a film and TV company, a publisher, a cable operator and AOL – would make each unit more nimble and better equipped to compete in their markets. They also claimed that investor value was being destroyed because the market cannot attach a single value to such disparate assets.

In response, Time Warner said it would review the plan but rejected its criticisms. "Our board and management regularly review all of the strategic options for managing this company," it said in a statement. "We are on the right path. The company is delivering."

Time Warner has already advocated buying back $12.5 billion in shares and spinning off a 16 per cent stake in Time Warner Cable. The company said last week that its pace of stock repurchases would double over the next three months.

Lazard concluded that the breakup would boost Time Warner’s stock price by between $5 and $8 a share. Shares of Time Warner closed yesterday at $18.36, down 22 cents on the session and showing little reaction to the report's publication.

Wall Street’s professional stock watchers were cynical.

Deutsche Bank told clients: "It is possible that their plan could work, but it is also possible that the disruption caused by such a massive restructuring could hamper execution at a critical time in the evolution of the impact of digital on media, that a $20 billion repurchase could over-leverage the company if projections turned out to be too rosy, or that the valuation multiples assumed are overly optimistic."

Credit Suisse reckoned the split made little sense at a time when valuations of internet companies are contracting and content providers may be poised for a rebound after tough year.

"The idea of a complete breakup seems draconian to us," the Swiss broker said in a morning note. "Separating a top three portal from content at this juncture could be a major strategic mistake in order to chase a short term stock multiple opportunity."

But Bank of America's argued that, while the rebels will probably fail, their actions may ultimately benefit investors.

"We think they have already lit a fire under management to a degree, persuading it to take several positive actions," BoA analyst Douglas Shapiro said in a note. "We expect it to continue on this course. So the Icahn group may lose the battle but, if the stock goes up, it will have won the war."

A month of press leaks, speeches and interviews from Mr Icahn’s allies meant the majority of yesterday’s proposals were exactly as Wall Street expected. The only real surprise was that Lazard stopped short of recommending that AOL merge with an existing internet portal.

"I never recommended a merger with a small portal," Mr Wasserman said at an investor presentation. "Carl Icahn ... reserves the right to disagree with us."

Icahn replied: "I never recommended a merger with a small portal. I recommended a merger with a large one."

Mr Icahn also revealed that he has selected his alternative board of directors and plans to name them as soon as next week.

Frank Biondi, the former Viacom executive who last week agreed to become chief executive if the rebel bid is successful, would head the team. He said yesterday that he would become chairman once the split was completed, with Jeffrey Bewkes, the current No 2 at Time Warner, offered the role of chief executive.

Read James Doran's take from Wall Street here: Time Warner: A bridge too far for Icahn?

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