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By Jim Hu DULLES, Va.--Barry Schuler wears his geek credentials on his sleeve.
He built the wireless network that lets him tap into his digital music and photo collections from any floor of his spread in suburban Virginia. In his corner office at America Online headquarters here, he displays an IMSAI microcomputer, a precursor to the PC that he put together himself in the mid-'70s.
To those who know him, this love for gadgetry says a lot about Schuler as AOL's chairman and chief executive--both good and bad.
"Barry doesn't want to talk about numbers and goals," said one former AOL executive. "He wants to talk about the interface and gadgets. Barry's at his best as the high-level creative mind."
Current and former colleagues describe the 48-year-old Schuler as a visionary with a confrontational streak, a guy who loves to tinker with technology and immerse himself in product development. But they also allow that he may not possess the kind of business acumen and operational expertise required of his job, arguably the hottest seat in the entire AOL Time Warner empire. Although Schuler has been with AOL since only 1995, he represents the old guard that ran the online company before the historic merger with Time Warner. His tenure is being followed closely by those looking for clues to the company's future leadership, which tilted significantly toward the Time Warner ranks when Levin appointed longtime lieutenant Richard Parsons as his successor over co-Chief Operating Officer Robert Pittman, AOL's president before the merger. A key question is whether Schuler's brand of leadership offers the right combination to deal with AOL's new challenges, which include nothing less than a reinvention of the company. As 2002 gets under way, America Online is hoping to evolve from its role as a provider of dial-up online services such as e-mail into a high-speed Internet entertainment and e-commerce hub. Schuler's challenge is to "build an upgrade path...and allow consumers to take the AOL experience to whatever form of connectivity they desire," said Robert Martin, an equity analyst at Friedman Billings Ramsey. That's a tall order, given that AOL is beginning to show signs of sputtering since Schuler took over responsibility for the division. It continues to struggle with weak advertising sales, slackening subscriber sign-up rates and growing competition from a reinvigorated Microsoft.
Of even greater concern are signs that growth of dial-up online service is beginning to plateau in the United States. Although AOL added 1 million new dial-up subscribers in 35 days in the fourth quarter of 2001, analysts say its growth rate has slowed.
Youssef Squali, an equity analyst at FAC/Equities, estimated that AOL added 1.7 million to 1.8 million new subscribers for the quarter, down from 2 million in the same period last year. "There's absolutely no arguing that dial-up subscriptions are slowing down across the industry," Squali said. |
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The slowed pace is not unique to AOL, but that doesn't mean Schuler won't be blamed for his company's waning numbers. Some speculated that he had lost a measure of confidence from above when Levin moved J. Michael Kelly in November from his role as chief financial officer of AOL Time Warner to chief operating officer of America Online. That position was left vacant after Pittman was promoted to co-chief operating officer of AOL Time Warner. Sources close to that decision said the move could ultimately be less about chastising Schuler than allowing him room to take the company to the next level. Even so, there is no denying that Kelly's reassignment was specifically aimed at giving AOL more operational discipline. "There's a possibility (Schuler) could be the sacrificial lamb," said David Simons, managing director of institutional research firm Digital Video Investments. "If things aren't performing...a typical reaction in companies is to put somebody new in."
A low profile, despite the flower prints AOL veterans consider Schuler instrumental to the company's success, crediting his redesign of its graphical user interface in the mid-1990s as a crucial point that helped turn some 33 million self-proclaimed Internet dummies into AOL devotees. Nevertheless, he has cut a winding, low-profile path to the top, never fully stepping out from the shadows of Pittman and AOL founder Steve Case, even after becoming CEO. A psychology major at Rutgers University, Schuler gravitated toward advertising and marketing after graduation, co-founding a creative agency called CMP that focused on high-tech clients. After 10 years, Schuler quit CMP to run Cricket Software, which was sold to Computer Associates in 1989. He then left for California, where he co-founded Medior, a software company that was tapped to redesign AOL just after it had surpassed 1 million members, making it the third-largest online service behind CompuServe and Prodigy. Schuler "was very opinionated and he followed his instinct," recalled CMP partner Eri Golembo. "He knew what he felt was the right way to go, and he pushed very hard to do it. He's confrontational in that he's not going to step down if he believes that's the right way to do something." Although AOL's success has long been attributed to its marketing prowess, Schuler's simple and uncluttered design is often given equal credit. Case was so impressed with it that he bought Medior in May 1995 for about $30.9 million in stock. "Looking at the design of how AOL should look, the whole room can say do it one way, and then Barry would sit back and say, 'No, we're doing it this way.' And (he'd) be right," said David Weiden, a former colleague who is now vice president of marketing at Internet telephony company Tellme Networks.
Waiting for the revolution
"When you get this broadband platform into the home, it will spawn a revolution," he said in a recent interview with CNET News.com. |
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Yet for all his enthusiasm, Schuler's strategy for AOL is surprisingly predictable for someone touted so widely as an Internet visionary. His master plan essentially consists of squeezing more monthly revenue from a growing roster of subscribers. Above all, that means switching as many customers as possible to high-speed broadband accounts while relentlessly promoting AOL Time Warner's sprawling entertainment products. In December, for example, AOL previewed a new music-subscription service, hoping to charge customers $9.95 a month on top of the regular $23.90 dial-up subscription fee. Schuler's optimism refuses to leave room for concerns about his division's health. "Are we going to go into a period of negative growth? It's not going to happen," he said. When prodded to discuss Microsoft and slowing subscriber rates, he flatly denies there is a problem. While he has acknowledged that Microsoft is a competitor that needs to be watched closely, he has long played down the significance of a direct clash between the two companies. That may be wishful thinking. Although MSN trails AOL badly in the U.S. Internet service provider market, Microsoft is making inroads on many other fronts, ranging from instant messaging to subscription services. Moreover, AOL's dominance in dial-up access may count for less as the industry sets its sights on broadband. AOL is the second-largest cable owner in the United States but needs to expand through acquisitions and partnerships to provide national broadband service. It has already suffered a major setback, losing out to Comcast in a December bidding war over AT&T Broadband, the nation's largest cable network. None of this appears to trouble Schuler, who seems content to pass over the awkward details of the present and place his faith in the future.
"Did we get impacted by the advertising economy getting worse faster than we ever would've expected? Yes," Schuler said. "Do I think that we have a business that is experiencing a downturn that's going to last a long time? Absolutely not."
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View Barry Schuler's report card
