To understand the vision of the future that Time Warner (NYSE:TWX) CEO Richard Parsons laid out at the Credit Suisse Media and Telecom Week Conference a couple of weeks ago, you've got to understand where the company's been. It's had a five-year journey toward recovery, but following a recent string of successes, it seems to be regaining its footing.

A quick look back...
The merger of AOL and Time Warner was announced in early 2000, and consummated the following year. At the time, AOL founder Steve Case and his minions clearly held sway over then-Time Warner CEO Jerry Levin and his group. AOL had been a star of the go-go Internet and technology craze of the late 1990s, and Time Warner was an old media company -- solid, but without the new-media pizzazz of its Virginia-based partner. I remember sitting skeptically in a New York hotel with hundreds of other analysts and institutional investors soon after the merger was completed, as Case, Levin, and other members of the management of what was then called AOL Time Warner trumpeted the deal's likely synergies between new and old media.

But shortly after the merger, AOL's fortunes began to fade, as subscribers moved away toward dial-up in favor of broadband offerings from cable and phone companies. The key spots in the combined company, which initially had gone largely to AOL executives, were progressively ceded to members of the Time Warner team, including Parsons' 2002 ascendancy to the company's helm. Now, after five moribund years and several far more promising months, the collective performance of the traditional Time Warner group -- including Time Warner Cable, Time, Inc., Warner Bros., HBO, and Turner Broadcasting -- has substantially improved, taking the company's share price with it.

AOL has shown signs of significant improvement as well, following its change from a subscription-based format to an advertising-based approach. Last month, Randy Falco, the former president and COO of the NBC Universal Television Group, was named chairman and CEO of AOL. That appointment continued to reverberate as recently as Friday, as several key AOL executives departed. The shakeup is hardly surprising; Falco has obviously adopted the role of new broom, and he's making a clean sweep of the company's ranks.

...And a look ahead
Against this backdrop, Time Warner Chairman and CEO Dick Parsons sat down at the conference with Credit Suisse analyst Bill Drewry for an in-depth dialogue. Drewry's first question for Parsons involved the company's likely allocation of capital in 2007, following a $15 billion stock buyback program in 2006, along with the dividends paid to shareholders. Because he had not yet discussed this topic with his board of directors, Parsons said a definitive answer to the question would be premature.

The next series of questions concerned what appears to be an inchoate turnaround at AOL, and asked Parsons about his rationale in hiring Falco rather than bringing in a proven Internet-company manager. "This is an advertising business we're trying to build here," Parsons replied. Of Falco, he added: "He's a superior manager; he's a superior person, a man of great integrity, and it's not as if he's lived in a bubble over the last 10 or 15 years at NBC."

Regarding the apparent turnaround itself, Drewry said: "It's not often that you can reawaken a brand as it was in the development period. Is that what's going on here?"

Parsons responded: "A little bit, but it's not just a marketing gimmick or trick. I think that if you just go online and you use the AOL client, as opposed to what some of the other portals provide, people like the client because it integrates everything on the screen for you."

The questioning then turned to Warner Bros., the film and television unit, which has seen its results soften somewhat in 2006 following several years of real strength. Parsons believes that 2006 is just a "step back." He added:

"The fourth quarter is going to be good for Warner Brothers, and that bodes well for 2007. We have a movie out now that only a few of us had any faith in before it broke. It's called 'Happy Feet.' It's been No. 1 for three weeks in a row. It's going to be a monster."

To cap off his assessment of Warner Bros.' circumstances, Parsons noted: "On the TV side, we've got four or five of our television programs going into syndication, and that's when the revenues hit." He also sees the challenge on the television side as one of riding the wave of technology and changing directions appropriately, rather than "getting too far in front of it or behind it." Parsons didn't mention it specifically, but over the past month, Warner has signed several significant international contracts to furnish content to video-on-demand operations.

Up goes the cable
Drewry concluded his questions with an inquiry into the sustainability of the accelerating growth at Time Warner Cable, a unit that the parent intends to spin off next year. He explicitly addressed threats from telcos Verizon (NYSE:VZ) and AT&T (NYSE:T), both of which have taken steps to offer video and to provide customers with TV, data, and telephone triple plays of their own. In response, Parsons mentioned remarks he's gotten from technologically savvy peers: "Dick, you don't really realize how far ahead of the rest of the market you are with your platform."

With his company's share price up 35% just since mid-July, and with most of its operations apparently headed to higher ground, there's little doubt that Parsons and his company finally have "happy feet," in more ways than one. If the company can stay in step, its shares could make for equally happy investors in 2007.

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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your comments.