May 16, 2002 9:55 AM PDT
Parsons aims to get AOL 'back on track'
- Related Stories
AOL reshuffles Internet exec deckMay 15, 2002
Ads key to AOL set-top plansMay 13, 2002
Merger costs weigh on AOL earningsApril 24, 2002
Pittman's rescue mission for AOLApril 19, 2002
AOL takes the high-speed challengeApril 10, 2002
America Online chief to step downApril 9, 2002
AOL's Parsons looks to digital futureApril 8, 2002
Parsons faces major test in unifying AOLApril 3, 2002
Parsons took the reins from outgoing CEO Gerald Levin, who bade an emotional farewell to the audience at the company's annual shareholders meeting here.
The executive handover comes as AOL Time Warner faces a critical juncture in its brief and tumultuous history. Created during the height of the dot-com boom, the company that once billed itself as the "next generation" media conglomerate has instead become a dream deferred. Although it has seen strong performance in some of its traditional media divisions, its America Online unit--once billed as the company's "growth engine"--has sputtered.
"In the past 18 months or so, everything has changed," Parsons said.
The five goals that Parsons has set up: Revitalize the company, restore credibility with investors, guard the integrity of the balance sheet, simplify the corporate structure, and re-energize the people who work at the company.
Ahead of the meeting, analysts said that the company seems to be toning down its talk of "synergy."
"It appears that the course for AOL Time Warner is now being plotted by the Time Warner influence, as opposed to the long-term-vision mantra earlier popular at America Online," Phil Leigh, an analyst at financial adviser Raymond James, said in a research note. "This 'back to basics' strategy seems to imply that AOL Time Warner is returning to its focus of creating and marketing compelling content, regardless of the method of distribution."
Analysts also said that AOL Time Warner's biggest issue right now is restoring credibility on Wall Street. In its first quarter earlier this year, the company reported $54 billion in losses related to the merger. And its stock has taken a steady drubbing in recent months. In May, its shares have been hovering around $19, having dropped some 70 percent of their value since the time of the merger.
Richard Parsons faces a major test
in unifying AOL Time Warner.
Some AOL Time Warner shareholders at the meeting also expressed disappointment in the company's low stock price but were upbeat about their expectations for the coming quarters.
"I'm not a happy camper about the share price, but I'm confident in (AOL Time Warner Chairman) Steve Case and (COO) Bob Pittman," said Diane Ross Kahan, a shareholder from San Antonio, Texas. "And I'll see what Dick Parsons will add to the pot."
With a little bit of luck
The shareholder meeting is taking place at Manhattan's famed Apollo Theater, which has hosted musicians from Duke Ellington to Aretha Franklin. One feature of the venue is a "tree of hope" that performers often touch for good luck before going up on stage, and Parsons made a point of making contact with it.
In an introspective speech, retiring CEO Levin appeared to struggle to hold back the emotions as he thanked his wife and colleagues for their support and reflected on a difficult year that included the Sept. 11 attack on New York, where the company is based. "Now I intend to just fade away," he said.
He also gave his support to his successor. "Don't let that teddy-bear demeanor deceive you," he said. "Dick is one of the most intellectually incisive of corporate leaders. When the situation demands it, he is utterly unintimidated with making tough decisions."
His parting words were for AOL Time Warner as a whole: "Have faith in this company."
The company is likely to need both faith and strong leadership as it undergoes a makeover, especially in its online unit. Advertising revenue continues to decline, boosted only by spending from other divisions in the company.
America Online's CEO, Barry Schuler, was replaced by Pittman, who was given a mandate to turn around the struggling division. Pittman has also shuffled AOL's executive ranks with more traditional media executives, including longtime radio executive Jimmy de Castro, who is running the AOL flagship service, and Bob Sherman from Time Warner Cable.
The whole of AOL Time Warner is headed in a different direction from the one foreseen in January 2001, when the merger closed. The company's original plan was to weave AOL's interactive expertise throughout the company's traditional media foundation to help revenue and earnings reach record heights.
But the expectations were tempered by the advertising decline, which has hurt many of the company's businesses. Instead, as AOL and its network divisions have floundered, other areas, notably its film studios, prospered last year. The release of the "Harry Potter" and "Lord of the Rings" films added considerably to the company's bottom line. Sequels to both franchises are expected later this year.
With his ascendancy to the helm of the company, Parsons will bring instructions for AOL Time Warner's diverse divisions to work more closely as a whole rather than as a sum of its parts. At the same time, the divisions will be expected to perform as market leaders in their relative areas.
Raymond James' Leigh said that Parsons recognizes that if he sets a "dramatic target" for the company, he only sets AOL Time Warner up to fail. "Synergy," he said, will take longer than expected.
News.com's Larry Dignan contributed to this report.