Steve Case, the embattled chairman of AOL Time Warner Inc. and an architect of America Online’s merger with Time Warner, will resign the position, the company announced Sunday.
Case said he would leave the position effective when the company’s shareholders gather for their annual meeting in May but that he plans to remain a director and will also continue to co-chair the company’s strategy committee.
“As you might expect, this decision was personally very difficult for me,” he said in a statement. “(A)s an architect of the merger I have felt it was important that I stay the course as Chairman and help get things on track.”
The former chief executive and founder of America Online, one of the architects of its stock merger with Time Warner, has been embattled for months over his continued role with the company. Since January of 2001 when the merger closed, AOL Time Warner’s stock price has gone from about $47.23 to close at $14.88 at the end of trading Friday, a drop of just under 70 percent.
Case said “this company does not need distractions at this critical time, and given that some shareholders continue to focus their disappointment with the company’s post-merger performance on me personally, I have concluded that we should take steps now to avoid the possibility of that effort hindering our ability to pull together as a team and focus fully on our businesses.”
Case’s colleague in weaving the AOL Time Warner merger, Gerald Levin, resigned as CEO of the merged company in 2002 and was replaced by Dick Parsons. Chief Operating Officer Robert Pittman, who had been dispatched to head AOL in place of Barry Schuler, was ousted in July, 2002.
After Levin’s and Pittman’s departures, shareholders increasingly turned their anger toward Case, arguing for his departure in light of the company’s year-long slide in stock price and the difficulties uncovered in the AOL unit.
Throughout the past year, as its advertising revenues declined, AOL has disclosed regulatory probes into how it booked advertising and commerce deals during the late 1990s and leading into the merger with Time Warner in 2001.
It has withstood a sharp drop in advertising and commerce revenues in 2002 and is expecting another 50 percent drop in ad/commerce revenues in 2003, as contracts, vestiges of dot-com companies striking long term deals, run their course.
In October, AOL Time Warner said it would restate $197 million in financial results for eight prior quarters as part of an internal probe of accounting practices from AOL’s dot-com heyday during the late 1990s and early 2000.
When it announces its fourth quarter and 2002 earnings results on Jan. 29th, the company is also expected to disclose a another charge against earnings to reflect the lowered valuation of the AOL unit. The Washington Post, citing unnamed sources, reported Thursday that the charge would be $10 billion.
Last year, AOL Time Warner recorded a $54 billion write-down as part of its 2001 annual report in order to reflect the lowered valuation of the merger. The charge was considered the largest asset impairment write-off in corporate history.
Case said his decision to step down from the chairman post was driven by important progress the company had made in building new leadership in key AOL Time Warner senior management positions, including new management at AOL and a companywide strategic review process, which he said are revitalizing the company.
“Given this progress, and the fact that we’re moving into more of an execution phase, this seems like an appropriate time for me to announce that I will step aside.”
CEO Parsons was informed of the decision over the weekend, the company said. Parsons also said in a statement, “I have valued partnering with Steve and am pleased he will continue to be active as a director even after he steps down as Chairman in May. His extraordinary vision and unique experience will be invaluable and I look forward to working with him for years to come.”
