Speculation stirs ahead of AOLTW Q4 results

The speculation over the future of AOL Time Warner Inc. (AOLTW) is set to reach yet another frenzied peak Wednesday when the company releases its fourth-quarter 2002 financial results.

While it would appear hard to beat the headline-grabbing news the media conglomerate garnered last quarter when it announced it was restating two years of results due to accounting irregularities within AOL, the recent announcement that AOL founder and chairman of AOLTW Steve Case has resigned amid growing pressure over the Internet unit's poor performance is sure to add some spark to this week's quarterly check-in.

Case is due to step down as chairman in May, although he still retains a seat on the company's board.

However, a report published in the Financial Times over the weekend indicated that some shareholders may attempt to oust Case from the company's board when he comes up for re-election in May. Whether or not they succeed, an attempt to exile Case from AOLTW all together would underscore a growing ire toward him.

Case, who served as architect of the 2001 marriage between then high-flying new media star America Online Inc. and old media stalwart Time Warner Inc., has become a lightening rod for anger and disappointment over the burst of the dotcom bubble. The surprise that a footloose Internet service could woo a buttoned-up publishing empire was only exceeded by shock and dismay of discovering that when the veil was lifted, the fresh-faced bride was not all that she appeared.

While AOL boasts a large subscriber base -- which currently stands at 35 million -- its subscriber growth has slowed, its online ad revenue has dried up and it somehow missed the first broadband bandwagon. And then there's the row over accounting.

When the two companies first tied the knot AOL's stock price was soaring, but mounting competition, stunted growth and dotcom downturn has taken its collective toll, and as AOL has struggled AOLTW stock has plummeted, losing nearly 70 percent of its value since the merger.

What's more, questions over AOL's accounting are dogging the merged entity, which announced last year that both the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) are scrutinizing its books.

AOL's questionable accounting and failure to deliver on highly optimistic financial promises have left some investors feeling they had the wool pulled over their eyes, and Case, as the scapegoat, appears to be getting the shears.

Given the pressure and a firm desire to resuscitate its stock price, AOLTW has retrenched, moving Time Warner veterans into key positions within AOL, while announcing a new strategy for the Internet division.

AOL head Jon Miller, who recently took the reins of the Internet unit, laid out plans in December to boost broadband subscribers, serve up exclusive content and offer more premium services.

Investors and analysts are hoping that the company will shed more light on progress on those fronts when the company reveals its quarterly results Wednesday.

Analysts surveyed by Thomson First Call predict fourth-quarter earnings of US$0.26 a share on revenue of $11.2 billion.

Meanwhile, shares of AOLTW (AOL) traded down 3.9 percent to $13.56 ahead of the results Monday.

With Case's place within AOL closed, it remains to be seen if AOLTW can overcome its problems and force a turnaround of its Internet business. There has been some question as to whether the company will decide to spin off the AOL unit in an initial public offering.

In the meantime, speculation is sure to mount as the largest media conglomerate in the world continues to keep viewers on the edge of their seats.

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More about America OnlineAOLDepartment of JusticeDOJFirst CallSECSecurities and Exchange CommissionTime Warner

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