January 12, 2005 11:15 PM PST

Case accepts blame for AOL-Time Warner debacle

MOUNTAIN VIEW, Calif.--Steve Case is not ashamed of taking the fall for the merger of America Online and Time Warner, perhaps one of the greatest failed deals in corporate history.

Two days after the fifth anniversary of the deal, a visibly graying Case, former chairman of what was then AOL Time Warner, provided a candid perspective into the factors that prompted the merger and some of the general reasons it failed. The blame could go to the billions of dollars in market value evaporating during the bust, or management's stubbornness in promising more than it could deliver, or doing all the wrong things at the wrong time.


Steve Case

From Case's view, the blame starts with him.

"In retrospect, I probably wasn't the right guy to be the chairman of a company with 90,000 employees," Case said during an event at the Computer History Museum here. "In retrospect, none of us were the right guys."

Indeed, for Case and Gerald Levin, then-CEO of Time Warner, the architects of the deal, grand visions of an Internet-charged media behemoth faded into the bland realities of turf wars and cutthroat politics. Case learned Time Warner's notorious culture of fiefdoms the hard way, as multibillion-dollar businesses bristled at the idea of working with their new AOL masters.

Case added that much of the merger's failed vision stemmed from a failure in "timing and execution." When the stock market began to collapse in 2000, the ripple effect did not reach AOL Time Warner (the company has since dropped the "AOL") until late 2001. After an embarrassing retraction of its financial forecast and a toppling stock price, Levin was shown the door, Chief Operating Officer Bob Pittman was ousted, and Case resigned as chairman in January 2003.

"The merger was my idea. If you wanted to be mad at somebody, I was the one to be mad at."
--Steve Case
former chairman,
AOL Time Warner
"For some reason--some was cultural, some was the stock going down--people got mad," he said. "The merger was my idea. If you wanted to be mad at somebody, I was the one to be mad at."

Still, Case's reasoning for the deal made sense: AOL needed Time Warner for its cable division.

While AOL was the undisputed champion of dial-up Internet access when the deal was inked in 2000, the greater threat posed by broadband loomed in the distance. Cable companies and local phone giants were the main purveyors of high-speed Internet access, leaving outside players such as AOL unable to upgrade their customers while keeping their access business profitable.

Now in 2005, AOL has watched its dial-up subscriber base plummet by nearly 4 million since 2002. Most of these customers left for broadband services provided by their cable or phone company, and Time Warner Cable decided to stick with its own Road Runner ISP rather than market AOL.

Time Warner "provided an unparalleled array of assets for AOL to transition to broadband," he said.

Out of the spotlight for two years and counting, Case has set his sights on other pastures. While still a member of Time Warner's board of directors, Case said he's turning his back on tech and the Internet for now, and focusing on new ventures. He's interested in health care, especially preventative medicine and wellness, and is dabbling in real estate. He's working on philanthropic issues and spending a lot of time in Hawaii, where he grew up.

Case wants to continue investing his time and money in "disruptive" businesses, but he remained mum on his plans.

"I don't particularly miss it," he said about the technology business. "I feel like I've been there, done that, and I'm interested in new things."

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Posted by patrickr (14 comments )
Reply Link Flag
Case Apology Not Worth a Dime
It was nice to here Steve Case apologize for the AOL/Time Warner merger, but it won't bring back the tens of thousands of dollars my retirement account lost ($150K to be exact). While he sits at home pondering his next mistake and counting his money, myself and other current and former employees are still trying to find ways to make up for trusting this blind visionary. Save your excuses, send me a check!
Posted by (2 comments )
Reply Link Flag
blind visionary
<a class="jive-link-external" href="http://www.analogstereo.com/pontiac_owners_manual.htm" target="_newWindow">http://www.analogstereo.com/pontiac_owners_manual.htm</a>
Posted by Al Johnsons (157 comments )
Link Flag
Case Apology Not Worth a Dime
It was nice to here Steve Case apologize for the AOL/Time Warner merger, but it won't bring back the tens of thousands of dollars my retirement account lost ($150K to be exact). While he sits at home pondering his next mistake and counting his money, myself and other current and former employees are still trying to find ways to make up for trusting this blind visionary. Save your excuses, send me a check!
Posted by (2 comments )
Reply Link Flag
blind visionary
<a class="jive-link-external" href="http://www.analogstereo.com/pontiac_owners_manual.htm" target="_newWindow">http://www.analogstereo.com/pontiac_owners_manual.htm</a>
Posted by Al Johnsons (157 comments )
Link Flag
Case is a disgrace to the Industry
Steve Case was caught by the FTC years ago for amortizing the CDs put in everybody's mail box, windshields, etc. over a 5 year picture instead of claiming it as expense. This showed AOL as making a profit to investors instead of an actual loss. He admitted his wrongdoing and paid a minimal fine. The guy is an A--hole and now makes an apology after being caugt at another fraud to make it look like he is a nice guy to further improve his appearance to investors. He doesn't quit!!
Posted by (2 comments )
Reply Link Flag
Case is a disgrace to the Industry
Steve Case was caught by the FTC years ago for amortizing the CDs put in everybody's mail box, windshields, etc. over a 5 year picture instead of claiming it as expense. This showed AOL as making a profit to investors instead of an actual loss. He admitted his wrongdoing and paid a minimal fine. The guy is an A--hole and now makes an apology after being caugt at another fraud to make it look like he is a nice guy to further improve his appearance to investors. He doesn't quit!!
Posted by (2 comments )
Reply Link Flag
case tried
Having lost a lot of my money of this deal I do say that most of
the fault has to lie with the Time Warner folks. When it took
Road Runner over one year to get the rights to use that name
from another division within the SAME company, you can realize
why Case messed up. He had the right idea to save AOL's dial up
future. But he got swindled by TW. He should have fired all the
so called geniuses at TW. While the stock tanked, all they did
was point fingers at the new guy (and up their collective *****)
and waited for the next coup. Billions lost, a new guy in charge,
and now they are cooperating. Crap. Didn't help me.
Posted by jrzshor (102 comments )
Reply Link Flag
case tried
Having lost a lot of my money of this deal I do say that most of
the fault has to lie with the Time Warner folks. When it took
Road Runner over one year to get the rights to use that name
from another division within the SAME company, you can realize
why Case messed up. He had the right idea to save AOL's dial up
future. But he got swindled by TW. He should have fired all the
so called geniuses at TW. While the stock tanked, all they did
was point fingers at the new guy (and up their collective *****)
and waited for the next coup. Billions lost, a new guy in charge,
and now they are cooperating. Crap. Didn't help me.
Posted by jrzshor (102 comments )
Reply Link Flag
Very noble of you Mr. Case...but, if you had any ball$ of sincerity, you would return all the monies the stockholders lost from your stupid mistake.....but I doubt that would ever happen. You say you take all responsibility.....?? Well then act upon it, and give the monies back! Real nice of you to back off into "another field" with stockholders money. I never cease to be amazed at you college grads with your Magna-***-Lauds, MBA's and other wallpaper in accounting and finance, and come along and screw things up so bad for a company. As common criminals would be, you should be barred from ANY business forever. Am sure your Wife and kids are proud of you.............
Posted by BlackBear10ML (1 comment )
Reply Link Flag
 

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