December 5, 2001 2:50 PM PST
CEO Levin to retire from AOL Time Warner
"After spending virtually my entire career at this great company, it is obviously a major decision for me to begin this succession process," Levin, 62, said in a statement. "But this is a step that I have been thinking about for some time and whose time has come. Given that we are almost a full year into the merger and that an outstanding management team is now in place at the company, I am convinced that AOL Time Warner should begin an orderly transition to a new era of leadership."
In conjunction with the move, Robert Pittman will become the sole chief operating officer. He will inherit control of all the company's divisions, and will report to Parsons. Steve Case will remain chairman of the company.
The announcement comes as a surprise and is a coup for Time Warner's old executive guard. Since America Online announced its intention to acquire Time Warner nearly two years ago, most industry analysts and company insiders assumed Levin, previously Time Warner's chairman and CEO, would choose longtime AOL executive Pittman because of his reputation and strong media background.
The unexpected announcement has slightly boosted AOL Time Warner's stock price. The company's shares closed up $1.08 cents at $35.83.
Parsons and Pittman "offer us a powerful and complementary combination of intellect, business acumen and strategic perspective, and I am looking forward to working with them closely in the years ahead," Case said in a statement. Parsons "has exactly the right style of leadership, understanding of people, ability to build alliances, and commitment to serve the public interest that is critical for the company."
Jordan Rohan, an analyst with SoundView Technology Group, said the questions that arise are "why, and why now?"
"Clearly the opportunities before AOL are becoming trickier to navigate every day," he said. "Parsons is known as a resolver of disputes, he's known for having the ability to get parts of the organization to work together, and it looks like that's the skill that is needed right now."
Levin's announcement comes more than two months after the company warned it would not meet its aggressive financial estimates for the year. AOL Time Warner said it would fall short of its expectations of $40 billion in revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) of $11 billion. The company now expects to reach double-digit EBITDA growth in 2002.
Dividing the pie
When AOL Time Warner carved up its divisions, Parsons, who had served as president of Time Warner, was given control of content businesses such as film, music and book publishing. Pittman, formerly president of AOL, was given a larger slice of the pie, controlling AOL Time Warner's subscription and advertising businesses, such as cable, magazines, Internet and TV networks.
Once the deal closed in January, after a grueling year of regulatory scrutiny and monitoring, the top ranks of AOL Time Warner's executive suites began filling up with Pittman loyalists such as executive vice presidents Mayo Stuntz, Kenneth Lerer and David Colburn.
Speculation during this time heightened that Parsons would take a position within the Bush administration, possibly as his commerce secretary. Parsons was passed up for the position, but nonetheless remained in service of President Bush by co-chairing his effort to overhaul Social Security.
In an interview with CNET News.com in May, it became apparent that Parsons was not completely out of the running for succession. Nor did he give positive assurance that Pittman was a shoo-in for the job.
"I mean, first of all, who wouldn't want to be CEO of AOL Time Warner?" Parsons said when asked if he would want to take the position. "I'm not fixated on it. I'll say this: There are any number of people in this company who are not only qualified to run AOL Time Warner, I would argue they are more qualified than I...And (Pittman)is one of them. (Pittman) is a very talented guy. (HBO Chief Executive) Jeff Bewkes is a very talented guy."
Parsons, widely respected in the industry and within the company for his statesman-like demeanor, will become one of the most powerful African-American corporate executives in the country. He has served as Levin's closest confidant in the company and has been critical in smoothing over inter-divisional conflicts and unclogging deal negotiations.
Parsons' ties in Washington are also critical to his role in the company. Besides his relationship with Bush, Parsons is widely enamored and respected by regulators and legislators. These connections will serve as a crucial asset to AOL Time Warner's ambitions to purchase AT&T's cable TV unit. AOL Time Warner runs the nation's second-largest cable network and will face intense regulatory scrutiny should AT&T accept its bid.
Meanwhile, Parsons will enter his role at a time of uncertainty. As the economy lingers in recession and the conflict in Afghanistan heightens, media conglomerates are being crippled by an anemic advertising environment.
Divisions within AOL Time Warner that have been hit the hardest include its magazine, TV network and music divisions. Its AOL division, considered the company's cash cow and its greatest driver of cash flow, has started to show a slowdown in revenue because of fewer ad dollars and slower subscriber growth.
The end of an era
Despite these hardships, Levin's retirement comes earlier than expected. Media industry insiders and former Time Warner executives had long quipped that the only way Levin would leave his office in AOL Time Warner's Rockefeller Center headquarters in New York would be through brute force.
AOL Time Warner representatives were vague about why Levin decided to call it quits this early in the game.
"Jerry has accomplished everything he set out to do at AOL Time Warner," said AOL spokeswoman Wendy Goldberg. "With the one-year anniversary approaching, he thought it was a perfect time to begin the succession process."
Goldberg added that Levin will devote his time in retirement to "social issues he feels very passionate about," but declined to comment on what those issues will be.
Calculating, disarming, incredibly patient and intensely political are some words AOL Time Warner insiders use to describe Levin. In a recent New Yorker magazine article, he was presented as a consummate observer, someone who takes himself out of a situation to view the big picture. And like a chess player, Levin's ability to think many steps ahead allowed him to preserve his standing and position.
Levin's tenure as head of the world's largest media company can be interpreted through his cunning survival instinct. After three major corporate mergers, including Time's merger with Warner, Time Warner purchase of Turner Broadcasting, and AOL's acquisition of Time Warner, Levin remained at the top.
When Time Warner acquired Turner Broadcasting in 1997, for example, many expected Ted Turner to take over the company, especially given his standing as the largest individual shareholder. Turner and Levin publicly engaged in a war of words, with Turner considering the sale the "biggest mistake of my life." Turner has since been pushed out of the company, a move he has repeatedly blamed on Levin's boardroom behavior.
But Levin leaves before proving the value of a merger that could be become the measure of his career. The executive sold the world's largest media company and copyright holder to an Internet company barely 15 years old. Some industry insiders say the combined company would be named Time Warner AOL if the deal were struck today.