January 30, 2003, 2:50 PM — News Wednesday that AOL Time Warner Inc. (AOLTW) was not only reporting a nearly US$100 billion loss for 2002, but also the departure of another top executive, has stirred what was already considerable speculation over both the company's past and future.
The media conglomerate formed when America Online Inc. (AOL) and Time Warner Inc. tied the knot in January of 2001 appears to be unraveling, as the company's Internet unit continues to flounder, leading to financial losses, internal tension and the exit of former AOL top brass, including founder Steve Case.
During release of the company's fourth-quarter and full-year 2002 results Wednesday, it was revealed that AOLTW Vice Chairman Ted Turner is the latest executive to bid the rocking ship adieu, preferring to pursue "philanthropic interests."
In a statement released late Wednesday, Turner said that he did not come to the decision lightly, given that the company had been part of his life for over 50 years. However, he said, he wants to devote more time to philanthropic causes and "socially responsible business activities."
Turner's resignation, which will take place in May, when Case is also set to sail, leaves much of AOLTW's future in the hands of Chief Executive Officer (CEO) Dick Parsons. Parsons has also been tapped to take over Case's post as chairman when he officially steps down.
And it appears that Parsons has his hands full.
During a conference call on the company's financial results Wednesday, Parsons said that investigations into AOLTW's accounting practices by both the U.S. Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC) are continuing. The probes were initially disclosed last year, and focus on allegations that AOL double-booked ad revenue.
Amid the scrutiny, AOLTW launched an internal investigation into AOL's accounting and turned up a handful of questionable transactions, leading the company to announce late last year that it would be restating two years of financial results.
The accounting issue is just one of the financial problems weighing on the AOL division, which reported an 11 percent decline in earning before taxes, interest, depreciation and amortization (EBITDA) for the fourth quarter 2002 on revenues that fell 6 percent year-over-year.
AOL's EBITDA for the quarter came in at $474 million on revenue of $2.3 billion, compared to $701 million for the fourth-quarter of 2001 on revenue of $2.2 billion.
AOL's continued weakness, which has been pinned on the evaporation of the online ad market, slowed subscriber growth and a slow move into broadband, has been cited for the nearly 70 percent drop in AOLTW's stock since the merger.