Time Warner Case Study
Case Summary
The merger of AOL-Time Warner hit rock bottom in January 2003, when the Company posted a loss of $98.7 billion for 2002, the largest corporate loss in US history.
Being an employee of the company, TJ (we) have to give fact-based answers to Memos, which are assigned to us.
In 2000, AOL purchased Time Warner for $164 billion, resulting in formation of AOL Time Warner. FCC, Federal Trade Commission and European Commission approved the deal a year later. AOL owned 55% of the new company, while the remaining 45% went to Time Warner, although AOL had very less assets and revenues.
Also, the merger was supposed to keep equal positions for top executives from each side. Gerald Levin, the CEO of Time Warner was appointed CEO of new company. Steve Case became Executive Chairman of BOD, Robert W. Pittman and Dick Parsons served as Co-COOs, and J. Michael Kelly was appointed the CFO.
The deal was considered to be a very intelligent strategy, as Time Warner will now reach almost tens of millions of new customers. Also, AOL would use Time Warner’s high-speed cable lines to deliver branded magazines, books, music and movies to over 130 million subscribers.
However the economic recession of late 2001 and the ‘burst dot-com bubble’ slowed the advertising and subscriptions resulting in a stalled growth and profitability of AOL division. The value of AOL division felt drastically as company reported a loss of $99 billion in 2002. The value of AOL stock fell from $226 billion to $20 billion.
Disputes at the annual BOD meeting resulted in the resignation of CEO Gerald Levin in May 2002. Dick Parson was appointed the new CEO and all other executives were demoted or promoted from their positions. Issues start to come from division heads too, as most divisions of Time Warner Inc. worked independently. They blamed AOL for not performing the part and resisted any convergence. COO Pittman’s strategy to bring all divisions together was not welcomed by print media
The merger of AOL-Time Warner hit rock bottom in January 2003, when the Company posted a loss of $98.7 billion for 2002, the largest corporate loss in US history.
Being an employee of the company, TJ (we) have to give fact-based answers to Memos, which are assigned to us.
In 2000, AOL purchased Time Warner for $164 billion, resulting in formation of AOL Time Warner. FCC, Federal Trade Commission and European Commission approved the deal a year later. AOL owned 55% of the new company, while the remaining 45% went to Time Warner, although AOL had very less assets and revenues.
Also, the merger was supposed to keep equal positions for top executives from each side. Gerald Levin, the CEO of Time Warner was appointed CEO of new company. Steve Case became Executive Chairman of BOD, Robert W. Pittman and Dick Parsons served as Co-COOs, and J. Michael Kelly was appointed the CFO.
The deal was considered to be a very intelligent strategy, as Time Warner will now reach almost tens of millions of new customers. Also, AOL would use Time Warner’s high-speed cable lines to deliver branded magazines, books, music and movies to over 130 million subscribers.
However the economic recession of late 2001 and the ‘burst dot-com bubble’ slowed the advertising and subscriptions resulting in a stalled growth and profitability of AOL division. The value of AOL division felt drastically as company reported a loss of $99 billion in 2002. The value of AOL stock fell from $226 billion to $20 billion.
Disputes at the annual BOD meeting resulted in the resignation of CEO Gerald Levin in May 2002. Dick Parson was appointed the new CEO and all other executives were demoted or promoted from their positions. Issues start to come from division heads too, as most divisions of Time Warner Inc. worked independently. They blamed AOL for not performing the part and resisted any convergence. COO Pittman’s strategy to bring all divisions together was not welcomed by print media