Case vaults to a new stage

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Assuming america online and Time Warner actually pull off their big-bang combination, AOL will morph from a profitable portal of the Web into AOL Time Warner, a huge, debt-ridden company dominated by old media. And it could be a good move.

Yes, all the synergy talk that accompanied the deal's announcement will generate a good deal of skepticism on Wall Street -- and on Madison Avenue. There was great talk of synergy, after all, when Time Inc. and Warner Communications merged in 1989. What that deal actually created was a big, big media company whose overall performance has been, at best, unexciting. Now here we go again.

More intriguing is what one of the most successful top executives of recent years -- AOL's Steve Case -- might do once all the assets of the two companies are at his disposal. His team at AOL has wrung profits from the Internet, and applause on Wall Street. Now can he succeed on a much bigger stage, where gains may be harder to realize?

First, however, Mr. Case must close his deal. To complete the transaction by yearend, he must keep AOL stock in the stratosphere so AOL and Time Warner shareholders will approve the all-stock acquisition. If the initial fall in AOL's share price is any indicator, Mr. Case hasn't yet made the case.

Then, the two marketers face enormous challenges in bridging divergent corporate cultures. Scrappy AOL has plotted its way through the interactive minefield since 1985. Bureaucratic Time Warner has plodded its way through two of the most hyped failures in "interactivity's" brief history: an Orlando, Fla., interactive TV experiment in the early '90s and the Pathfinder Web misadventure later in the decade.

Still, this is a merger that can work. AOL needs Time Warner's broadband and content; Time Warner needs AOL's Internet savvy. Soon enough, AOL vans could be driving around your city offering consumers cable, Web and phone access over the same line. Advertisers can look forward to all sorts of package deals. (We're not sure how AOL's annoying pop-up ads will work over the phone; we'll wager someone is thinking about it.)

But the biggest reason to believe this deal has a chance to realize some of the aspirations of its creators comes down to two words: Steve Case. Convergence is happening. Mr. Case brilliantly navigated AOL through the Internet revolution. Now he plans to make himself chairman, rather than CEO, of the future AOL Time Warner. To successfully bridge the old and new media, we bet -- and hope -- he will be guiding the ship.

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