AOL chairman to resign in May
Published: Monday, January 13, 2003 at 6:01 a.m.
Last Modified: Monday, January 13, 2003 at 1:09 a.m.
NEW YORK - AOL Time Warner Inc. chairman Steve Case will resign his post in May, the company said Sunday, two years after Case presided over one of history's most stunning corporate coups - and then one of its most spectacular nosedives.
The announcement came after months of pressure on Case from shareholders disappointed in the results of the 2001 mega-merger of America Online and Time Warner. The combination has been dragged down by the collapse of the Internet advertising market and a lack of synergy between its many businesses.
Case said in a statement that he was stepping down because "some shareholders continue to focus their disappointment with the company's post-merger performance on me personally."
"This decision was personally very difficult for me, as I would love to serve as Chairman of this great company for many years to come," he said.
He will remain on the company board and continue to co-chair its Strategy Committee.
Case co-founded Internet service provider America Online in 1985 and used its skyrocketing fortunes in 2000 to unleash the $106 billion acquisition of Time Warner's film, magazine and cable TV empire.
Since then, Case's fortunes have crumbled alongside AOL Time Warner's stock price, which shrank from $72 per share at the time of the merger to less than $15 at Friday's close.
Case's long-expected departure is just the latest and most dramatic executive shuffle at the company. With the conglomerate's stock price stuck in the mud, Time Warner executives have slowly regained control of the merged company, blaming AOL for its misfortunes and leaving Case in ever-deepening isolation at the top, analysts said.
"Case's departure is the final step in new media's loss of control over Time Warner," said Dylan Brooks, senior analyst for Jupiter Research. "The company is going back to being a media conglomerate, where new media is a small part."
The announcement follows months of speculation as to how long Case would last.
Case, a 44-year-old native of Hawaii, presided over almost a decade and a half of remarkable growth at AOL, the first Internet company to be named to the Fortune 500. Many analysts credit the service with almost single-handedly introducing Americans to the Internet, and investors soon took notice, bidding its stock into the stratosphere by the time of the merger.
With 35 million members worldwide, it remains three times as large as its nearest rival, Microsoft's MSN service.
At the time of the merger, AOL's takeover of Time Warner was promoted as an exciting example of a new economy business reviving an old one. But as its fortunes soured alongside other technology firms, many proponents of the merger left, were forced out or demoted in the last year as investors grew increasingly dissatisfied.
Jerry Levin, the Time Warner chief executive at the time of the merger, retired in May. Bob Pittman, an America Online veteran, resigned as chief operating officer in July. Barry Schuler lost his job as America Online chief executive in April and was reassigned to a lower-profile position. Several lower-level executives were also dismissed.
The merged company has been hampered by the collapse of Internet advertising, and investigations by the Securities and Exchange Commission and the Justice Department into AOL's bookkeeping practices have given investors even more reasons to stay away.
In October, AOL Time Warner said it would restate two years of financial results because of accounting practices at America Online that had inflated revenue by $190 million. And last week, The Washington Post reported that the company has warned analysts to expect a write-down of at least $10 billion for the America Online business.
The company took a $54 billion charge after its first quarter last year in order to account for the decline in America Online's value.
AOL Time Warner's stock has recovered from a summer low of $8.70, closing at $14.88 Friday, but it's still far from trading above $50, as it did just after the merger.
AOL Time Warner's businesses include movie studios Warner Brothers and New Line Cinema; Time magazine; TV channels HBO, CNN, and Cartoon Network; Time Warner Cable; record company Warner Music; and Internet service Compuserve.
As an architect of the merger I have felt it was important that I stay the course as Chairman and help get things on track. However, after careful consideration, I believe stepping down is in the best interest of the company."
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