Architect of troubled AOL mega-merger stepping down
NEW YORK — Steve Case, the man who made his name betting on the future, is history at AOL Time Warner.
Case will step down as chairman of AOL Time Warner at the annual shareholders’ meeting in May, the company announced Sunday night, in a move aimed at soothing relations with irate investors and employees who lost billion of dollars in AOL TW stock after the giant merger.
Case, who had vowed not to quit, tendered his resignation to CEO Richard Parsons and the board of directors over the weekend, saying his departure “is in the best interest of the company.”
Pressure on Case to resign has been intense as AOL TW stock continued to flounder and questionable accounting at America Online prompted several federal inquiries. In particular, board member Ted Turner; Liberty Media’s John Malone, a big shareholder; and powerful fund manager Gordon Crawford wanted him out.
A handful of directors staunchly loyal to Case made a board coup all but impossible. But it looked increasingly likely shareholders might vote him out at the annual meeting (Daily Variety, Jan. 9). He decided not to wait and find out.
AOL TW “does not need distractions at this critical time, and given that some shareholders continue to focus their disappointment with the company’s post-merger performance on me personally … we should take steps now to avoid the possibility of that effort hindering our ability to pull together as a team and focus fully on our businesses,” Case said in a statement.
“It’s about time. It’s great news. It takes pressure off the AOL unit, which is really only 10% of the company,” said one portfolio manager.
AOL TW staffers, most from the former Time Warner, were infuriated as their stock options turned worthless and 401K accounts shriveled. AOL Time Warner shares, which started dropping along with the Internet crash, lost about 70% of their value last year alone. Growth slowed at America Online. The Securities and Exchange Commission and the Justice Dept. launched separately investigations into the Netco’s accounting practices.
The raft of exposes and analyses of the failed 2-year-old deal showed no signs of abating. Last week, CNBC aired its first ever documentary, “The Big Heist,” about the AOL/Time Warner merger.
AOL managers have for the most part been replaced in key positions by Time Warner brass and most execs behind the deal are gone. Former CEO Gerald Levin resigned about this time last year. Bob Pittman, Cases’ second-in-command at AOL, ankled last summer.
Case’s ongoing high-profile role was a kick in the teeth to staffers and investors, many of whom do indeed blame him for their depleted net worth. Next up: Many hope the company will remove A-O-L from its name and change its stock symbol from “AOL” back to “TWX.”
In his statement, Case said the new crop of AOL TW managers has identified key trouble spots at America Online, which he joined in 1985, and is on the road to repairing it.
“Given this progress and the fact that we’re moving into more of an execution phase, this seems like an appropriate time for me to announce that I will step aside.” He said he will remain on the board and continue as co-chair of the company’s Strategy Committee.
Shareholders, however, will still have the right to strip him of his director title at the May meet.
The Karmazin question
AOL TW’s statement didn’t mention plans to replace Case. Wall Streeters have speculated that Parsons may assume the chairman’s post and bring in another exec — like Viacom’s Mel Karmazin — as CEO to oversee day-to-day operations. Parsons could also take both the chairman and CEO titles. But the current trend in scandal-plagued corporate America is to split the two jobs up.
Karmazin’s contract expires at the end of the year. The highly regarded Viacom chief operating officer appears not to have to renegotiated a new deal yet. Until he does, Wall Street and media industry insiders continue to wonder where he’ll wind up.
But one fund manager said he thinks the company is more likely to promote from within, and may not take any action immediately. “Maybe they’ll let Don Logan run it all for a year and then make him CEO,” he said. The former Time Inc. topper is now head of AOL TW’s media and communications group.
Parsons’ performance as chief executive has garnered mixed reviews. But it has never paid to underestimate the congenial exec. Many were surprised when Parsons won the CEO title and not his co-chief operating officer Pittman, who at one time was widely regarded as the wunderkind successor to Levin.
In a statement, Parsons said, “I have valued partnering with Steve…His extraordinary vision and unique experience will be invaluable and I look forward to working with him for years to come.”
Case said the decision to leave was “personally very difficult,” but added, “The bottom line is this: I love the company, and will do whatever I can to make it successful. I believed in America Online when we built it; I believed in AOL Time Warner when we created it; and I continue to believe in the great potential of this company and its people.”