Fears About Ross’ Health Jolt Stock of Time Warner : Media: Some insist that the chairman’s condition is worse than acknowledged. That is raising leadership concerns.

Concerns about the health of Time Warner Inc. Chairman Steven J. Ross have helped drive the company’s stock price sharply lower this week, as analysts and people who do business with the giant media firm worry about its leadership.

Time Warner stock slid $1.25 a share to $79.75 on the New York Stock Exchange on Wednesday after trading as low as $78.25. The price is just above the 1991 low of $77.75.

Ross, 64, announced late last month that he is undergoing treatment for prostate cancer. “My physicians are optimistic,” he said at the time, “and Iam maintaining my normal work schedule.”

But sources close to Ross say his health problems are more severe than has been revealed.

More than a dozen senior executives at companies that do business with Time Warner said in interviews that they believe that Ross is seriously ill. The base their opinions on personal contacts with Ross and conversations with other Time Warner executives.

All declined to be quoted by name. But on Wall Street and in Hollywood, the home base of the Warner Bros. movie studio, speculation is rife about the possible fallout if Ross were to be forced to step aside from running a media empire that includes motion picture, television, publishing and cable operations.

“The big question is, ‘Will the board keep it whole?’ ” said one financial analyst, referring to concerns that Time Warner directors would sell off parts of the company to pare down debt.

Ross declined to be interviewed about his condition. But in a statement to be issued to Time Warner employees today, President and Co-Chief Executive Nicholas J. Nicholas says Ross is undergoing “routine” treatment for prostatic cancer. It labels rumors about Ross’ health “tasteless and unfounded.”

According to the memo from Nicholas, who is in line to succeed Ross as chairman, “the tests show that the cancer has not spread,” adding that Time Warner will refrain from further comment out of respect for Ross and his family’s right to privacy.

Time Warner declined to comment on whether Ross’ role in company operations has been affected by his illness as he undergoes a combination of chemotherapy and hormonal treatment. But it appears that his schedule has been curtailed more than the company has acknowledged.

Arthur Liman, a prominent New York lawyer who is one of Ross’ closest advisers and confidantes, confirmed in an interview this week that Ross has cut back his workload and canceled numerous social engagements. Ross has already begun a Christmas vacation that involves resting at home, Liman said.

“He has not been going to dinners, and he’s been following the advice of doctors, which does involve not working himself the way he did before,” said Liman, who noted that Ross had surgery to remove most of his prostate several years ago for what at the time was diagnosed as a benign condition.

Ross’ illness forced him to bow out of a 600-person black-tie dinner Tuesday sponsored by the American Jewish Congress. He had been scheduled to be co-chairman of the event with media mogul Rupert Murdoch and such stars of the New York business world as financiers Felix Rohatyn, Henry Kravis, James Robinson and Herbert Allen.

Ross has also canceled a planned vacation trip to Asia.

Questions about Ross’ health come during a sensitive period for Time Warner, which is working to put into effect a mammoth strategic partnership with Toshiba Corp. and C. Itoh & Co. The Japanese companies agreed in October to pay $1 billion for a 12.5% stake in Warner Bros. and Time Warner’s cable television operations.

Early next year, debt-burdened Time Warner also faces renegotiation of its bank credit agreements.

Liman said Ross is resting in large part because he “aggravated” his condition by working so hard in recent months to wrap up the deal with Toshiba and Itoh.

Rumors that Ross--both lauded and criticized for his innovative deal-making--may have to step down soon from Time-Warner’s chairmanship have sent the stock price lower, analysts say, largely because of fears that his departure from the company might hurt its entertainment businesses.

Long the head of Warner Communications before the company merged with Time Inc. in 1989, Ross is widely credited with an ability to attract and keep stars for the company’s movie, television and music businesses. Hollywood executives say there is no one in Time Warner’s New York headquarters who shares Ross’ ties to the Hollywood community.

“Steve is a quintessential force in that company,” said John S. Reidy, an analyst with Smith Barney, Harris Upham & Co. “He’s been one of those few executives that dealt well with the volatile character of talent in the film business and music business.”

Reidy said it’s unclear if the loss of Ross would have a major adverse effect on the company. “But anyone that owns the stock certainly is very hopeful that his tenure will continue for a while,” Reidy said.

Edward J. Atorino, an analyst with Salomon Bros. Inc., said: “There is only one Steve Ross. To the extent that he remains active in the company, it’s a plus.”

Times staff writer John Lippman contributed to this story.