AOL Time Warner Seeks New AOL Chief
Friday
July 12, 4:24 PM EDT
By Reshma Kapadia
NEW YORK (Reuters) - AOL Time Warner Inc. (AOL),
the world's largest media company, said on Friday it
was looking for a new chief executive for its
America Online Internet unit, intensifying
speculation on the future of the incumbent, Robert
Pittman.
Pittman, who is chief operating officer of AOL Time
Warner, returned to the online unit this year
charged with getting it back on track. Pittman ran
AOL before the company bought Time Warner in January
2000.
"He's really become a scapegoat," said SG Cowen
analyst Peter Mirsky.
AOL has been suffering from anemic online
advertising spending and a slower-than-expected
migration of its Internet subscribers to high-speed
services, becoming a drag on the whole group.
Tricia Primrose, a spokeswoman for AOL Time Warner,
said the company had hired search firm Spencer
Stuart. "It should come as no surprise, because when
we announced that Bob was going down to AOL in
April, we said it was an interim position," she
said.
The company gave no timetable, but some people with
knowledge of the search said an announcement would
come sooner rather than later, perhaps as early as
in two weeks.
Its shares closed down 56 cents, or 4 percent, at
$13.14.
The move comes amid an increasing realization that
turning around AOL will take more than a couple of
months.
"When they said interim, they meant he would get
(AOL) quickly turned around, get cash flow growing
and have a business direction and then he would
gracefully step aside. That's not what has
happened," said Henry Asher, president of Northstar
Group, which owns AOL Time Warner shares. "It's
pretty obvious that's not the course things have
taken."
OUT WITH THE OLD GUARD?
Investor sentiment -- and morale within AOL Time
Warner -- have soured as its stock has fallen 70
percent since AOL bought Time Warner in 2000 in a
deal whose bid to merge old and new media many now
question.
"I think Pittman should be fired. He should have
been long ago," said Ajay Mehra, portfolio manager
at Columbia Management, which owns AOL shares. "For
investors, this is a nightmare and it can't get
worse. Pittman leaving is a good thing. Someone new
has to come in."
Pittman, praised for his operating skills, was seen
as one of the best executives to help revive AOL,
which has been dragging down the overall growth of
the company, home to CNN, HBO, People magazine and
Warner Bros. studios.
Pittman was one of the executives who championed the
company's aggressive revenue and earnings growth
targets in the face of a slowing economy that
devastated the advertising market. The company
ultimately slashed expectations, undercutting
management's credibility with Wall Street.
Industry insiders said they would not be surprised
to see Pittman leave the company altogether.
"There certainly has been a falling out. He was such
a golden boy for such a long time and is now largely
reviled within the company," said veteran industry
analyst Gary Arlen, of Arlen Communications. "He
looks like a visionary and works like a manager. He
really did have a good, long run."
Speculation had been building since he was passed
over last year for the company's top job, which
ended up going to his then co-COO Richard Parsons.
But the company brushed off such speculation. "He is
COO and has been, and nothing has changed," Primrose
said. "He's doing his job today. He's at a
conference."
Recent management shuffles -- such as the departure
of Gerald Levin, the former CEO and a key architect
of the merger that created AOL Time Warner -- have
suggested that the company is phasing out the old
guard most closely linked to the deal.
The new chief will help resolve questions about
AOL's identity: whether it is going to focus on
advertising or new Internet services, Arlen said.
The company has cast its net wide in its search for
an AOL chief, including some executives well-versed
in interactive businesses, according to a person
familiar with the search.
The new AOL chief could come from the ranks of
former or current executives at dot-coms like eBay
Inc. (EBAY)
or Amazon.com Inc. (AMZN)
or even rival Microsoft Corp. (MSFT)
But if AOL Time Warner can woo a respected media
executive, it may prefer that candidate over someone
from with interactive experience, the person added.
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