Steve Case has announced he will resign as AOL’s chairman, following a lengthy battle to meld old and new media after the company’s 2001 acquisition of Time Warner.
In a statement, Case said the difficult decision to step down was influenced by growing shareholder concern over the company’s post-merger performance. He noted that the focus of that concern had shifted toward him personally. Case also cited a transition to the new leadership of CEO Dick Parsons, Jeff Bewkes and Don Logan; AOL’s new management; and the completion of several strategic plans as other factors in his resignation.
“The bottom line is this: I love the company and will do whatever I can to make it successful,” Case said.
His departure in May will leave the company without any of the original merger architects in major leadership positions. Case will remain a director on the company’s board and will co-chair the Strategy Committee.
Case co-founded AOL in 1985 and helped build the company into the United States’ number one Internet service provider, with more than 35 million subscribers. In early 2001, the company acquired Time Warner in a US$106 billion deal that included the purchase of Warner Bros. and New Line Cinema, Time Magazine, Time Warner Cable and HBO.
Case’s resignation comes amid a U.S. Securities and Exchange Commission investigation into AOL’s ad revenues. The company issued revised accounting figures in October that reduced revenues by $190 million, and eliminated $97 million in qualified earnings over 21 months.
Analysts had expected Case’s move. AOL Time Warner stock has lost 52 percent of its value in the past 52 weeks, and 60 percent since the merger. The decline in AOL’s value resulted in a $54 billion charge that torpedoed earnings last year, and the company is expected to take another major write-down when it announces fourth-quarter results this month.
“This has been in the works for six months,” UBS Warburg analyst Christopher Dixon told the E-Commerce Times, referring to Case’s exit. He pointed to difficulties that AOL and Time Warner encountered in integrating their corporate cultures — which took longer than anyone anticipated — and said many Time Warner executives had felt slighted by the merger.
“Steve stepping down provides a way to boost morale, but more importantly, [it] provides an opportunity for the various management businesses to focus on their businesses as opposed to focusing on office politics,” Dixon noted.
A Positive Sign?
Analysts said they see Case’s departure as a positive move for the company, and a possible sign that the AOL brand may be fully absorbed by Time Warner.
“Case wasn’t exactly revered by the old Time Warner executives,” Morningstar.com stock analyst Jonathan Schrader told the E-Commerce Times. “He was viewed as an obstacle [to] Time Warner’s ability to swallow up AOL.”
Schrader said he believes the resignation will boost employee morale, adding that it already has been positively received by shareholders, who pushed up the company’s stock price in early trading. AOL Time Warner stock was trading up 31 cents, or 2 percent, at $15.19 in midday trading Monday.
Schrader also said it would not surprise him if the company were to drop the “AOL” from its name. “They have a lot of great brands that are not in the corporate letterhead,” he noted.