|The New York headquarters building of AOL Time Warner and site of history's largest corporate loss.
RICHARD PARSONS NAMED CHAIRMAN OF AOL TIME WARNER
Elected Unanimously by Board of Directors
STEVE CASE RESIGNS AS AOL TIME WARNER CHAIRMAN
Embattled Architect of Disastrous Merger Throws in the Towel
CNN CEO STEPS DOWN
Walter Isaacson to Head Washington Think Tank
PARSONS: FIXING AOL WON'T BE 'QUICK OR PAINLESS'
AOL Time Warner CEO Sees AOL's Best Hopes Overseas
AOL TO RESTATE TWO YEARS OF FINANCIAL RESULTS
Cites $190 Million Overstatement of Advertising and Commerce Revenue
AOL REVEALS POSSIBLE REVENUE BLUNDER
Three Deals Worth $49 Million Cover Six Quarters
CEO Richard Parsons announced Mr. Turner's departure, effective at this year's shareholders meeting in May, in a conference call with analysts. Mr. Turner has decided to step down to pursue his philanthropic activities, Mr. Parsons said.
An AOL Time Warner spokeswoman said Mr. Turner's letter to Mr. Parsons referred only to his role as vice chairman, but "it's our CEO's expectation Ted will remain on the board and they will be talking about it."
Decline in value
The media conglomerate reported a 2002 net loss of $98.7 billion, or $22.15 a share, including a net loss of $44.9 billion in the fourth quarter, due to charges to earnings to reflect the company's decline in value.
AOL Time Warner in the first quarter of 2002 reported a charge of $54 billion to reflect the decline in the value of Time Warner assets since the merger of America Online and Time Warner in January 2001. It took another $45.5 billion charge in the fourth quarter that reflected the decline in value of America Online ($33.5 billion), AOL Time Warner's cable unit ($10.6 billion) and AOL Time Warner's music unit ($1.5 billion).
Pushed to the edge
The charges cut the company's year-end net worth -- assets minus liabilities -- to $52.8 billion, meaning the net worth valuation has fallen more than half from the $115.5 billion net worth of a year ago. The new net worth came close to breaking debt covenants requiring AOL Time Warner to maintain a net worth of at least $50 billion. But AOL Time Warner quietly renegotiated its credit agreements to eliminate that net-worth requirement.
Mr. Parsons said it is making debt reduction a "priority" in 2003, including possible asset sales. He said the company is considering putting "non-core, non-strategic" assets on the block. He added AOL Time Warner will use the proceeds of a planned initial public offering of its cable operation to pay down debt.
Revenues were up 7% for the year, to $41.1 billion, thanks mainly to strong growth at the film division, which offset a drop of 9% in advertising revenue due to weakness at America Online. Fourth quarter revenue rose 7.5% to $11.4 billion.
AOL Time Warner executives vowed the company will right itself in 2003, but said this year's performance will be less than spectacular.
Mr. Parsons referred to 2003 as a "reset year."
Earnings to remain flat
Chief Financial Officer Wayne Pace said the company expects to grow revenues in the mid-single-digit percentages and earnings before interest, taxes, depreciation and amortization will remain essentially flat. America Online revenues will remain flat, with advertising/commerce revenues down 40% to 50%, he said. The first quarter will likely mark the low point for the year, when declines in America Online advertising revenue will more than offset improved performances by the filmed entertainment and network units, Mr. Pace said.
AOL Time Warner made the announcements after the market closed. The stock closed at $13.96, up 30 cents. In after-market trading this evening, it dropped to $12.55. That is still well above the stock's post-merger nadir of $8.70 last summer. Since the merger closed, AOL Time Warner stock value has plummeted 73%.
The drop in the stock's value had been a sore point with Mr. Turner, who is AOL Time Warner's largest individual shareholder, with a 3.1% stake worth $1.7 billion. By contrast, Stephen Case, who earlier agreed to step down as chairman while remaining on the board, owns just a 0.24% stake now worth $130 million.
Continually criticized the merger
Extremely vocal throughout his career, the CNN founder has continually criticized the merger. Some analysts believe Mr. Turner will continue his verbal attacks on the company from the outside.
Symbolically, his departure is not good news for the struggling media giant, say stock market analysts. This means another major executive has left AOL Time Warner, a list that now includes CEO Gerald Levin and Chief Operating Officer Bob Pittman.
Wall Street analysts believe Mr. Turner really wanted more control, or possibly to run the company himself. Other analysts believe he was forced out, and that his continued attacks on the company could have contributed to his demise by the AOL board.
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Wayne Friedman and Bradley Johnson contributed to this report.