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Time machine gears up with Pittman out

With AOL profits AWOL, TW goes back to future

NEW YORK — AOL Time Warner ejected chief operating officer Robert Pittman and elevated top execs at HBO and Time Inc. Thursday as the company faces intense financial scrutiny many fear could open yet another painful chapter for one of the media’s most troubled mergers in recent history.

Yet Wall Streeters, industry players and Warner Bros. staffers praised the latest management revamp as HBO’s Jeff Bewkes and Time’s Don Logan split oversight of the conglom’s content and subscription businesses. It’s the triumph of “old media” over “new media,” but with AOL Time Warner’s stock hovering at all-time lows, no one is celebrating yet.

The well-regarded, low-key execs will try to accomplish what others have failed to do: get the media empire’s disparate fiefdoms working in tandem and restore the faith of financial markets.

“This is a very large company. We don’t look at it as dividing the businesses. We want to work together to bring some coordination,” Bewkes told Daily Variety. The appointments also set the stage for the release of first-half financial results on Wednesday, when CEO Richard Parsons is in for some griling by analysts and investors.

Bewkes, 50, will become chairman of the new Entertainment & Networks Group, which includes Warner Bros. and New Line Cinema, Turner Networks, the WB, HBO and Warner Music. Logan, 58, as chairman of the Media & Communications Group, will lead America Online, Time Inc., Time Warner Cable and the AOL Time Warner book and interactive video unit. Both men will report to AOL TW CEO Richard Parsons.

Chris Albrecht, prexy of HBO Original Programming, will step up at powerhouse cable net HBO as chairman and CEO. Time Inc. exec VP Ann Moore, responsible for launching such mags as InStyle, Real Simple and Teen People, becomes chairman and CEO of the prolific publisher.

The hard-charging Pittman, once regarded as AOL’s savior and a frontrunner for the top job at AOL TW, resigned under a cloud. Since the merger, AOL’s ad revenue has evaporated, subscriber growth slowed and synergies between old and new media have proved elusive.

Accounting cloud

And, in a climate where corporations are imploding right and left, some think AOL and its aggressive accounting will come to haunt AOL Time Warner.

“There’s a high probability that something was going on there,” said one fund manager.

As a string of big companies face tougher scrunity, it’s become clear that “there’s a narrow line between what’s aggressive and what’s illegal,” he added.

Federal Reserve chief Alan Greenspan predicted earlier this week that a large number of U.S. corporations will restate earnings downward in coming months. AOL TW could be a likely candidate for such revisions.

An investigation by the Washington Post suggested that Pittman presided over a host of questionable practices as prexy of AOL that inflated revenue figures as the company was orchestrating its merger with Time Warner. They included shifting revenue from one division to another; selling ads on behalf of other dot-coms like eBay and booking the sale as AOL’s own revenue; recording barter deals as ad and commerce revenues; and renegotiating long-term ad contracts with distressed Internet companies in order to avoid losing short-term gains that pumped up quarterly sales figures.

The company said in a statement that the practices outlined in the Post series are “appropriate and in accordance with GAP” — generally accepted accounting principles.

While some of the bookkeeping may be ethically challenged, there’s no evidence it was illegal or that any official probe is under way. “The Post has been investigating for months. If there was another shoe to drop, it wold have fallen by now,” insisted one company insider.

AOL TW shares dropped more than 5% Thursday to close at $12.45. They traded as low as $11.75 during the session — a far cry from $50 a year ago.

Logan was named CEO of Time Inc. in 1994 and chairman in 1997. He served as prexy-chief operating officer beginning in 1992. He’s overseen a period of strong cash flow growth and new launches at the publisher, whose marquee titles include Time, Sports Illustrated, People and Entertainment Weekly. The company boasts a 25% share of the U.S.. magazine market.

Ann Moore joined People as publisher in 1991 and helped found Sports Illustrated for Kids. She has overseen business and development for Time, People, InStyle, Teen People, People en Espanol, Real Simple and the Parenting group.

More casualties expected

In a statement, Parsons and AOL TW chairman Steve Case wished Pittman well. Pittman, who was dispatched six months ago to turn AOL around, said, “It’s time to take a break.”

Logan said the search for a new CEO for AOL continues and that it’s too early to discuss layoffs or cost cuts at the unit.

Dulles, Va..-based AOL has already laid off hundreds of staffers, but media insiders doubt the housecleaning is over.

“I think they are going to throw out the entire team that’s been running AOL,” said one industry player.

Casualties could include Mike Kelly, who was shifted from chief financial officer of AOL Time Warner to chief operating officer of America Online early this year after run-ins with Wall Street and flak for the company’s overly optimistic earnings projections. Former AOL CEO Barry Schuler was put in charge of new-media projects at AOL. And Pittman ally Kenneth Lehrer, who used to head corporate communications and investor relations for the conglom, recently had his portfolio rerouted.

The role of conglom chairman and AOL founder Case is becoming increasingly nebulous as Time Warner managers now have full run of the executive suite.

“Case was going to run the most admired company in the world. He said it many times. Obviously, it hasn’t happened,” said one irate investor.

(Meredith Amdur contributed to this story.)

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