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Thread: AOL Time Warner executives debate name change

  1. #1

    AOL Time Warner executives debate name change

    How can a company lose $100 billion in 2002?

    http://reuters.com/financeNewsArticl...toryID=2232624
    AOL Time Warner executives debate name change
    Fri February 14, 2003 03:38 PM ET
    By Reshma Kapadia

    NEW YORK, Feb 14 (Reuters) - AOL Time Warner Inc. AOL.N executives, at a retreat to discuss turnaround strategies, hotly debated whether to drop "AOL" from the corporate name, as the world's largest media group tries to rebuild its business, sources familiar with the matter said on Friday.

    AOL Time Warner Chief Executive Richard Parsons has said the company has no plans to change the name.

    Investors and some executives have been advocating for months to drop "AOL" from the group's name as the America Online division, once viewed as the crown jewel, has dragged down overall growth.

    The meeting of 150 executives held over the last two days, which also touched on strategies to meet the company's 2003 financial targets and included questions about asset sales and other issues at hand, is the first time all these executives have met together.

    For months, the online unit has endured slowing subscriber growth and federal probes into its accounting, leading some to question the whole concept of the original $106.2 billion merger that married AOL with the traditional media businesses of Time Warner.

    Since then, AOL Time Warner has grappled with a record net loss of nearly $100 billion in 2002, a share price that has fallen about 70 percent in two years, and a forecast for little overall earnings growth this year.

    The company, which has contended with clashing corporate cultures since the merger, has had a series of key resignations in recent months. In January, AOL Time Warner Chairman Steve Case -- the last key architect of the merger -- succumbed to investor pressure and said he would leave, followed by the decision by outspoken media mogul Ted Turner to resign as vice chairman.

    The management retreat, which had been planned for some time, was something Parsons had wanted to address those "at the frontlines" and to bring together executives who often do not spend much time in the same room together, sources said.

    Executives, gathered at a hotel in Manhattan, participated in panels about innovation, for example, discussed strategies to meet its financial targets and to cut debt and listened to leadership advice from former U.S. Gulf War commander Norman Schwarzkopf, one source familiar with the meeting said.

    The meeting comes as AOL Time Warner's management tries to regain credibility on Wall Street, repair relations among its ranks, cut its $26 billion debt load, and find ways to build momentum for a turnaround.

    One decision reached at the retreat was to rule out a combination of its CNN news channel with Walt Disney Co.'s DIS.N ABC News, saying that a combination would be too problematic to pursue.

    Questions about possible asset sales also emerged on Thursday, said one of the sources, who had close knowledge of the discussions.

    Jeff Bewkes, chairman of AOL Time Warner's entertainment and networks group, told executives at the retreat that CNN was not for sale but if a high-priced offer surfaced, as with anything else, it would have to be considered, the source said.

    Parsons has said a top priority is cutting the company's $26 billion debt and has said AOL Time Warner would consider sales of non-core businesses, from its books publishing group, to stakes in Comedy Central and Court TV and its sports teams.

    Bankers and consultants have speculated the company could eventually consider selling other assets if it still needs cash -- from Warner Music to CNN, but those options have been characterized as highly unlikely.

    But the pressure has been on for AOL Time Warner to do something about its music arm given the sickly state of the industry. One source close to the companies told Reuters last month Warner Music has held informal talks with rival EMI Group Plc EMI.L about renewing negotiations over a range of possible links.

    Shares of AOL Time Warner rose 11 cents to $10.26.

  2. #2
    Senior Member SlomoScott's Avatar
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    sounds VERY similar to when Worldcom "merged" with MCI, soon after everyone discovered how overrated worldcom stock was and they drug down the new company.

    how can they lose $100 billion?
    - maybe it was never really there to begin with. they provide a service that is more like a commodity now-a-days.

  3. #3
    Senior Member mk99's Avatar
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    People make it sound like they actually lost $100billion in cash which is not the case.

    Most of the charge was an accounting "write-off" to reflect the massive drop in value of the shares and is not real cash. It's still a pretty impressive loss though... who can top that? Wait a few months and find out

  4. #4
    I guess that I was asking who lost the $100 billion and whether anybody gained it. It is a lot of money. Let me try to think through it.

    At the height of the dot com frenzy when everybody was bidding up aol stock to levels that are worth thousands of time its real value, people did spend a lot of money buying stock. Who benefited from this stock runup? Well the people holding the stock gained a lot. Steven Case utilized the overvalued stock to purchase Time-Warner and more investors bought into AOL-Time-Warner. Eventually, AOL-Time-Warner stock fell by over 70%. The people bought the stock when it was high are the losers.

    AOL-Time-Warner lost $100 billion because the value of AOL went from a gigantic inflated block of stocks to a nearly worthless pile of paper. In the end, AOL brought little or no value to Time-Warner. The question is whether people were misled by the hype to invest in overvalued AOL-Time-Warner and whether anybody came out of this deal richer. Well, one can argue that people who bought AOL-Time-Warner stock were victims of irrational exuberance. Perhaps the only beneficiaries of this fiasco are Steven Case and other holders of AOL stock at the time of the merger because they exchanged their AOL stock for Time-Warner stock which, even though it has fallen by 80%, is still worth more than AOL stock would be today.

    Wise.

  5. #5
    Senior Member mk99's Avatar
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    It's not a zero sum game.

    People who cashed out at the top made serious money. Short sellers made serious money. The rest of it just pretty much "evaporates" and many shareholders got wiped out.

    Just like currency, it's really a game of confidence. We believe money has value therefore it has value. As soon as people don't believe it, it's worthless and the "value" goes into a great big black hole. Unless you were smart enough to convert the money into something like gold or land which has inherent value.

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