January 10, 2000 3:00 PM PST

Can new empire avoid titanic clashes?

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Ted Turner The massive merger of America Online and Time Warner will assemble some of media's biggest names in one room, a marquee headed by Ted Turner, Steve Case and Gerald Levin.

With so much star power involved, and the egos behind it, concerns have already arisen over the possibility of boardroom clashes as monumental as the merger itself, the largest in history.

But those familiar with both companies believe that the leadership of AOL Time Warner will not be as volatile as it may appear at first glance--and that it may actually unify the ranks by grooming an heir-apparent to the new throne in AOL star Bob Pittman.

"I know there's going to be a lot of speculation with all that strong management and personalities that there's a possibility for some friction, You've got Time Warner but I don't think that's going to happen," Turner, vice chairman of the new company, said in a conference call this morning. "I think we're committed to making this thing work."

To many in the increasingly convergent media and Internet industries, the merger made perfect sense on paper. AOL needed help in expanding beyond the computing world, and Time Warner needed an Internet strategy. In reality, the key to success will be how well the two very different companies can meld the personalities who run them, as well as their operations.

Here's how the balance of power is shaping up at this early stage: AOL chief executive Case has already moved away from the daily operations of the company he founded, spending more time with such things as speeches and political initiatives. Turner has done much the same, choosing to remain on the sidelines in recent years. And Time Warner chief Levin, CEO of the new company, turned 60 last year and will be under pressure to find a successor.

That leaves Pittman, AOL's president and chief operating officer, and Richard Parsons, Time Warner's president. Both will be co-chief operating officers of the new company, but sources say Pittman, who made a name for himself as a senior executive at MTV, is the one in line for ascension.

Although Levin made no mention of a successor in today's conference call, he was ebullient in his praise for Pittman in particular.

Topping the merger charts
America Online-
Time Warner
(pending)
$183.7 billion
Vodafone AirTouch-
Mannesmann
(pending)
$142.2 billion
MCI WorldCom-
Sprint
(pending)
$128.9 billion
Exxon-
Mobil
(closed)
$85.2 billion
Bell Atlantic-
GTE
(pending)
$85 billion
Source: Bloomberg
"Time Warner is a construct of a lot of acquisitions over a relatively short period of time where people have had to be assimilated and nurtured. That's what happened at AOL," he said. "And this is the supreme irony that we have Bob Pittman, who grew up in our culture, and his expertise and brand building, and everything he's done in AOL really came out of the way we behave. I think you're going to see we have a team right away."

A Time Warner source agreed with that assessment: "A lot of the people at the top level at AOL are old entertainment guys. They know the pace."

Where things could go awry, according to this executive and others, is among mid-level executives at both companies. Time Warner is a corporate behemoth whose Byzantine structure and political sniping are legendary.

Nor is AOL immune to internecine bickering, particularly as it has grown by thousands of employees and millions of members. Friction was reported in staff integration after its earlier merger with Netscape Communications, and internal disputes have arisen over the direction of AOL's channel strategy, according to sources familiar with the company's management.

The company has stumbled on some key external issues as well, such as persistent problems with subscriber access that led to legal action by several states. Critics assailed the way AOL handled public relations over that issue as much as the dial-up debacle itself.

In the end, it may be the business of the Internet itself that determines the combined company's future. "I think it will be a little problem with people here taking orders from an upstart," a former Time Warner executive said. "But they also don't know a lot about the Internet world."

That was most evident in Time Warner's disastrous initiative known as Pathfinder, an umbrella site for all its media properties that became a symbol of failure in the Internet industry. The company then planned to decentralize its Net operations, but that strategy, too, seemed to stall.

Others say it is too soon to tell how well the AOL and Time Warner leaders will meld, noting that the two companies have just begun their honeymoon period. They point to high-profile problems with senior management at rival Disney, where close relationships between CEO Michael Eisner and former executives Michael Ovitz and Jeffrey Katzenberg disintegrated into public messes and huge payoffs by the company.

But those at the top of Time Warner appear willing to give their new Internet partners the benefit of a doubt, given the company's own dubious online efforts.

"Steve Case and Bob Pittman--together with Jerry Levin, Ted Turner and Dick Parsons--will guarantee that AOL Time Warner stays at the forefront of the Internet revolution," Carla Hills, Time Warner director and former U.S. trade representative, said in a statement.

News.com's Jim Hu contributed to this report.

 

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