CRUNCHTIME: Time Inc.

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The AOL Time Warner marriage has been particularly hard on a former golden child, Time Inc. The venerable publishing house, viewed as a star performer within Time Warner, is now in the disconcerting position of having to prove itself all over again.

Time Inc.'s three biggest weeklies-Time, People and Sports Illustrated-have all seen significant ad page drops this year, as has Fortune. Fortune already has gone through buyouts and asked for resignations. As many as half of Time Inc.'s famed stable of 14 editors-at-large may leave, and up to 800 buyout offers are expected to go out to the company's 13,000 employees in late May. Glum insiders suspect additional staff reductions may follow later this year; Chairman-CEO Don Logan refuses to rule that out. "We have no idea how many will sign up" for the buyouts, he said. (One Time Inc. executive said the company's hoping that a third of those offered will accept.) "Once this round takes place, we'll decide whether to do more or not," Mr. Logan said.

Insiders blame the new company more than the economy. "The problem with AOL," said one Time Inc. executive, "is that it's given management a migraine." Thus the tones of bewilderment, anger and near-nostalgia. This executive compared the company to a gold medallist in the decathlon who is suddenly forced to be a gold medallist in several new events, in an atmosphere where the oxygen-read ad revenue-is suddenly in short supply.

"Has the bar been raised?" Mr. Logan asked. "Probably no more than we'd would have [raised it] ourselves."

A sense of bewilderment is even heard outside the company, mixed with a betrayal at the perception that AOL Time Warner has run roughshod over "the crown jewel" of the magazine world. Time Inc., observers and company insiders note, amassed a pretty impressive growth record inside a publicly traded company, even in the face of multiple money-draining launches a year, well before AOL came to town. Time Inc. has had 37 consecutive up quarters.

Mr. Logan called such talk "misguided," and noted that "Time Inc. continues to run its own show" the way it always has. The quick change of pace once the merger went through jolted perceptions, he suggested. "It feels like there's a lot more change, than the reality of what it will be once [the merger] settles down."

"We've had great years for the last nine years," Mr. Logan said. "We think this will be a good year." He expects profits to continue to rise.

Meanwhile, lavishly detailed reports of perks-gone-by-like the cutbacks on multiple-course dinners on deadline-prompt extravagant hyperbole among Wall Streeters. "It's crazy that kind of stuff is built into these companies," said one analyst. "They make investment banking look like the rag trade."

But AOL Time Warner does not mean the end of Time Inc., as some dark-minded insiders would have it. "The important parts of our culture," Mr. Logan said, meaning its editorial and journalistic commitment, remain "sacrosanct."

Some good news has come out of Time Inc. since the merger. Co-Chief Operating Officer Bob Pittman credits Time Inc. with boosting America Online subscriptions via disks sent to Time Inc. subscriber lists. America Online, in turn, has given Time Inc. a much-needed source of new subscriptions for its titles. And Mr. Logan said the new company "allowed [Time Inc.] to develop a coherent Internet strategy without spending an arm and a leg."

But this year's round of changes could significantly impact the Time Inc. of yore-a specific culture of top-notch journalism, generous packages and long careers within the company. Already, it seems to belong to a day gone by, ready to be enshrined somewhere, like the famous Time and Life black-and-white photos of events past that line the walls of its corporate offices.

Total Q1 Revenue $966 mil, up 3%

ebitda $113 mil, up 20%

management Don Logan, chairman-CEO; Norman Pearlstine, editor-in-chief

properties Time, People, Sports Illustrated, Fortune, In Style, Entertainment Weekly, Southern Progress Corp., Time4Media and American Express Publishing, joint venture with American Express Co.

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