AOL’s Interactive Chief de Castro Departs

After leading the recent launch of America Online 8.0, James de Castro is stepping down as president of AOL’s interactive services division, the company said today.

His departure comes seven months after he joined AOL from an executive
position at radio holding company Clear Channel Communications. It also comes as AOL works to complete a company-wide “strategic review” ahead of a meeting with its corporate parent over the ISP’s strategy for growth.

During his time with AOL, de Castro helped launch an effort to refocus the
company’s brand, and is credited with leading the work behind 8.0, the ISP’s latest
e-mail/software product, including offering members first looks at content and programming. His work also included offering exclusives and so-called “appointment viewing,” in order to offer advertisers broadcasting-like dayparts for reaching specific

de Castro was reportedly expecting to be named chief executive of AOL after
Robert Pittman was forced out last August. Instead, the company named former
USA Interactive e-commerce chief Jon Miller as chief executive.

The news that de Castro would depart signals a further consolidation of
power for AOL’s
second-in-command, Vice Chairman Ted Leonsis, a veteran of the company.
After de Castro leaves at the end of November, Leonsis is to oversee the
interactive services organization
that de Castro headed, the company said.

In a prepared statement, Miller, who is also AOL’s chairman, praised de
crediting him with the successful launch of the AOL 8.0 product.

“Jimmy infused the whole place with new energy, and assembled a world-class
team that has restored the sizzle to our brand by creating innovative,
must-have new programming. We understand Jimmy’s desire to run an
organization as a chief executive officer, and we wish him all the best.”

The departure of de Castro from the ranks of senior management follows
recent news
that other executives were either departing or had been shown
the door in recent weeks.

AOL is currently in the midst of a strategic
of its operations, and is expected to present its results and
strategy for growth to the board of directors of its corporate parent, AOL
Time Warner by either late November or early December.

The exit of de Castro is sure to keep tongues wagging over management’s direction as the world’s largest ISP works to right its corporate ship amid a brutal advertising climate. Since 2001, its marriage to media
giant Time Warner, and subsequent drag on its parent company’s stock price as revenues fell, has prompted speculation over whether AOL would be spun out from the
corporate fold.

Its parent company has had to restate
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. The announcement knocked about $190 million in revenues and $97
million in cash earnings from the company’s balance sheet.

Of AOL Time Warner’s media divisions, only AOL’s results have fallen in the
weak advertising market. For the third quarter, AOL’s revenue was $2.2
billion, down about 7 percent from the same time last year when it took in
about $2.3 billion.

Advertising and content revenue for AOL fell by 48 percent to $321 million
from $612 million during the prior year’s quarter. Content and other
revenues fell by 63 percent to $67 million from $180 million, which was
affected by termination of the company’s iPlanet commerce agreement with Sun

With competitors looking to poach AOL’s 35 million subscriber base with
cheaper rates for dial-up Internet service, as well as cheaper monthly rates
for broadband, AOL has been working to withstand an onslaught of competitive
threats to its base.

Company officials have said its slowing growth in its (26.7 million)
US-based subscribers during the third quarter reflects not only a maturing
market for narrowband, or dial-up service, but also the company’s focus on
making each subscriber more profitable rather than signing up users with free trials.

Meanwhile, AOL Time Warner’s Chief Executive, Richard Parsons, said during a
discussion of the media giant’s third quarter results that it would hold an
analyst briefing on December 3rd in New York to discuss AOL in detail.

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