Co-CEO Nicholas Ousted in Clash at Time Warner : * Communications: New President Gerald M. Levin pioneered Time’s entry into cable programming.

Nicholas J. Nicholas was ousted as president and co-chief executive of Time Warner Inc. on Thursday in an apparent coup organized by the company’s ailing chairman, Steven J. Ross, with whom Nicholas shared the CEO title.

Nicholas, a 52-year-old veteran of Time Inc., had clashed repeatedly with Warner Communications Inc. founder Ross, 64, who is being treated for prostate cancer and has been homebound since the end of November.

Company employees and observers were stunned by Nicholas’ sudden departure, the latest twist in the unhappy saga of Time Inc.’s debt-financed acquisition of Warner, parent of Warner Bros. Studios.

Nicholas’ position will be filled by Gerald M. Levin, 52, the Time Inc. visionary who steered the magazine company into cable television and pioneered the use of satellite transmissions by Time’s HBO pay television unit.

Nicholas and Ross, one management source said, had clashed over Time Warner’s sale last fall of a stake in its film and entertainment businesses to Japan’s Toshiba Corp. and C. Itoh Ltd. Tensions between the men were spawned by last summer’s Time Warner rights offering fiasco, in which the company came under strong criticism from the financial community for structuring a deal viewed as one-sided in Time Warner’s favor.

In recent weeks, the source said, the strains had grown so strong that the two men had refused even to speak to one another.

Under terms of the Time Warner merger agreement, Nicholas had been slated to become sole CEO of the firm in 1994. But his ouster gives credence to those who believed that the co-CEO arrangement was a sham from the start and that it was Ross--whose lavish compensation package has drawn embarrassing attention to the debt-burdened company--who really dominated Time Warner.

One Hollywood executive with close ties to Time Warner, who asked not to be named, said Ross’ illness may have precipitated the shake-up.

“Steve is very sick,” he said. “So they have to deal with the reality of succession instead of the theory of succession.”

Said the executive: “Steve always preferred Levin. He’s more show business oriented than Nicholas. Levin is a brilliant guy. He’s much more user-friendly. He has a real affinity for the movie, TV and record businesses. He already knows the Hollywood community.”

Beyond its magazines, Time Warner’s holdings include the Warner Bros. Studios, Warner Bros. Records, Warner Home Video, HBO and one of the nation’s largest cable TV operations.

A formal statement attributed to Nicholas only hinted at the depth of the divisions in the firm’s executive suite.

“For a company to fulfill its potential requires a clear strategic focus shared totally by its leadership,” Nicholas said, according to a statement issued by Time Warner. “Upon careful reflection, I have concluded that there is sufficient difference between myself on the one hand, and the board and management on the other, so that my resignation should now enable a single and consistent view to prevail.”

Nicholas also resigned as a member of Time Warner’s board of directors.

“They did a Gorbachev on him,” said one Time Warner insider, referring to last summer’s brief ouster of the former Soviet president while he was on vacation. “Ross organized it while Nick was on a skiing trip with his family.”

Nicholas could not be reached for comment; Jeanette Lerman, Time Warner vice president for communications, refused to elaborate on the company statement.

In the statement, Ross was quoted as saying: “We respect Nick’s decision. We appreciate his many achievements and contributions during the years in which Time Inc. and Warner Communications were combined into the world’s premier media and entertainment company.

“Indeed,” Ross continued, “it was his vision and initiative that brought about the very idea of combining Time Inc. and WCI in the first place.”

The appointment makes Levin the heir-apparent to Ross. Despite rumors to the contrary, Lerman insisted that Ross “is responding well” to cancer treatments. “His doctors are continuing to express optimism, and he’s continuing to work from home,” she said.

Lisbeth R. Barron, an entertainment analyst with S. G. Warburg & Co. in New York who is well connected at Time Warner, said she first heard rumors about Nicholas’ probable departure about six months ago.

She said she understands that differences between the two men reached the breaking point last year, when Ross went ahead with the rights offering over Nicholas’ strong objections.

Barron said Time Warner should be able to carry on easily without Nicholas.

“My suspicion is that he was from really the more traditional publishing side of the business, which is not the focus of the company,” Barron said. “So I would not assume it’s a significant loss to the management of the company.”

One source speculated that Warner Bros. Chairman Robert Daly or President Terry Semel will be moved up to a senior management position in New York, though Warner officials declined comment.

Both executives have spent extensive time in New York recently, but it is not known if the trips had any connection to the company shake-up. Hollywood sources have openly speculated for months that Ross’ health problems would force a management change.

“At the moment, Levin seems to be the anointed one,” Barron said. “There doesn’t seem to be anyone else to take that role. Ross is so unique, there may not be anyone who can replace him.”

Despite Levin’s affinity for the television side of the business, at least one magazine company employee said his elevation is not a concern. Said this employee: “From what I’ve heard, he’s been a better advocate of the editorial side than Jason McManus,” the editor-in-chief of Time’s magazines.

Victor F. Zonana reported from New York and Alan Citron from Los Angeles.