AOLTW chairman quits over criticism

Steve Case is to step down as chairman of AOL Time Warner Inc. (AOLTW) in May, saying that shareholder criticism of him had made it hard for the company to focus fully on its businesses.

In a letter to the board of directors over the weekend which was released to the press, Case said he would have liked to serve as chairman for many years to come, but had decided to step down in the best interests of the company.

"This company 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, I have concluded that we should take steps now to avoid the possibility of that effort hindering our ability to pull together as a team," Case wrote in the letter.

He added that progress made in rebuilding the core management team also made this an appropriate time to step down. Case expects to continue to contribute to the company as a director and by continuing to co-chair the company's strategy committee, he said.

The surprising news of Case's departure sent shares of the company (AOL) inching up 1.48 percent to US$15.10 in morning trading Monday.

However, analysts suggested that the stock boost could be largely due to a matter of perception, given that significant changes have already been to the company's management and Case will continue to shape strategy from his post on the board of directors.

"There have already been significant changes, starting with the departure of [former AOLTW chief executive officer (CEO) Gerald Levin]," said Gartner Inc. analyst David Smith.

"But Case took a lot of the blame," he added.

It was not immediately clear who would replace Case as chairman although some industry pundits pointed to Levin's successor Richard Parsons as first in line for the post.

Case was the principal architect of the biggest merger in history between two media firms, when America Online Inc. and Time Warner Inc. announced almost exactly three years ago that they would join forces to create a company worth over $300 billion.

The marriage has been rough from the start, however, leading Levin, who agreed to the merger as the former Time Warner chairman, to step down last year. Following his departure, investors, angry with the fact that the media conglomerate was failing to live up to the ambitious expectations it set for itself, increasingly turned their ire toward Case.

It did not help matters that former high-flying AOL began to flounder in the face of slowed subscriber growth and a dwindling online add market.

The Internet unit has been widely labelled as the albatross around AOLTW's neck, serving to drag down the entire company despite successes in Time Warner's film and video properties.

Stock in AOLTW has fallen around 70 percent in the two years since the merger was completed, and shareholders have repeatedly criticized Case's lackluster performance in charge of the merged entity.

A collapse in online advertising revenue, threatened job cuts, allegations of improper accounting and the continued slide of the stock price added up to a bad 2002 for the media giant.

But as late as September, AOL Time Warner said that Case's position at the company was secure.

Instead, Case, apparently by his own hand, has become the first high-profile media and technology executive to depart in 2003.

But although Case has jumped ship, the move is not expected to lead AOLTW to rougher waters. The company undertook an executive overhaul last year and already set a new strategy for the AOL unit.

New AOL head Jon Miller, who has reportedly spent significant time under Case's wing, told investors and company executives late last year that he plans to bolster the unit's performance by concentrating on the broadband market and securing premium content. Since then, AOL has already shown closer cooperation with AOLTW's sprawling media empire, and has entered an agreement to provide AOL subscribers with exclusive Web content from some of Time Inc.'s magazines.

The company still faces significant challenges, however, including mounting competition from rival Internet service providers and government probes into AOL's accounting. The company is likely to further detail its plans for moving forward when it releases its 2002 fourth-quarter and full-year results on Jan. 29.

Reactions to Case's resignation on Internet bulletin boards were mixed Monday.

"You know what, this guy brought the very Internet that we have all grown to know and love to the homes of millions of Americans," wrote one sympathetic user on Slashdot.com.

Others took a more critical tack.

"Perhaps now I can regain some of the money I lost in the freaking stock of AOL!" wrote another Slashdot user.

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