Portfolio: "The bigger the company, the smaller the gains"

Shares of big media companies have taken a beating in recent years. Portfolio reports that in the last year alone, "between last week and the same week a year ago,"shares of Time Warner have declined 50 percent, Viacom is down 59 percent, shares of G.E. have tumbled 46 percent and News Corp. shares slid 65 percent. Shares of Disney experienced the lowest decline, losing "just" 34 percent in value.
One reason for the declines and poor performance may be the lack of collaboration between divisions of major conglomerates. Portfolio notes that the "supposed synergies...have never really blossomed."
To cope, some companies, such as Time Warner, have completely detached entire divisions from the big company. Time Warner successfully spun-off Time Warner Cable last spring, "which delivered shareholders over $10 per share in dividends." Prior to that move, the cable division's performance was dragged down by the conglomerate's other divisions, and "the unit's success was never reflected in the larger company's share price."
Recent moves by other big-media companies suggest that, "in general, if a media property is strong, it performs better outside of a conglomerate than inside one."
Ultimately, the performance of big media may depend on the caliber of its management. However, sometimes even the best management team may be "overextended" when trying to manage all of the various divisions of a giant conglomerate.
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