July 22, 2002, 9:32 AM — AOL Time Warner Inc. (AOLTW) just can't seem to get a break. On top of an advertising slump, a plummeting stock price, an executive shakeup and reported financial shenanigans, arch rival Microsoft Corp. is planning an all-out assault in one of the company's key markets.
With so many challenges facing the world's largest media and entertainment company, one can't help but recall the saying "the bigger they are, the harder they fall." But as the company prepares to reveal its second-quarter results Wednesday, analysts say that all may not be lost for AOLTW, which still has some strong assets under its command.
For one thing, the company is expected to come in on-target with its second-quarter results, despite a rough-and-tumble economic climate. Analysts surveyed by Thomson Financial/First Call forecast pro forma earnings of US$0.22 cents per share, with revenue slightly over $1 billion (last year's second quarter saw earnings per share of $0.32). What's more, the company's flailing stock price, which has dropped nearly 60 percent so far this year, actually makes the stock a steal for some analysts. JP Morgan Chase & Co., for one, reaffirmed its "buy" rating on AOLTW shares Thursday.
The New York-based brokerage, like many others, are viewing Thursday's executive reshuffling as a positive sign. In a widely anticipated move, AOLTW announced the resignation of Robert Pittman, the company's chief operating officer and interim head of the America Online Inc. (AOL) Internet division.
At the same time, the company said that Don Logan, former chairman and chief executive officer (CEO) of Time Inc., will become chairman of the new Media & Communications Group, which includes AOL, and Jeff Bewkes, formerly chairman and CEO of HBO, has been tapped as chairman of the new Entertainment & Networks Group.
The elevation of Logan and Bewkes is viewed as a clear victory for the company's Time Warner Inc. contingent. Former executives of Time Warner and AOL had reportedly been brawling for control of AOLTW since the two companies merged 18 months ago. The Time Warner executives' old media experience and preference for business decentralization comes as a switch from the new media thrust of Pittman, an AOL veteran known for citing AOLTW's ability to leverage the combined strength of its various media holdings as its greatest asset.
In the end, even Pittman had to concede that this strategy wasn't working, however, as units within the company continued to bicker and compete over advertising deals.
"The old company is regaining control," said Michael Gartenberg research director at Jupiter Media Metrix Inc.
"When AOL took over Time Warner ... people said, 'Why is this great new media company bothering with this dinosaur'. A couple of years later it's, 'Why is this great media company screwing around with this new media company'," Gartenberg said.