- The Washington Times - Tuesday, January 14, 2003

America Online yesterday braced for life after Steve Case, the company's co-founder, technology genius and boy wonder who created one of the Internet's best-known brands.
Employees at the Sterling, Va., unit of AOL Time Warner Inc. have four months to get used to the idea that a Time Warner executive is likely to take over the corporation that was supposed to represent the superiority of the technology industry over traditional media.
Mr. Case yesterday stood by the statements he made Sunday night that AOL Time Warner Inc. would be better off without him leading the Internet and media giant.
"There's no question that this merger so far has been a disappointment," Mr. Case said. But "if you look out 10 to 15 years, I think people will look back and have a different view on this merger."
In an e-mail sent to employees Sunday night, Mr. Case stood by the merger.
"The bottom line is this: I love the company, and will do whatever I can to make it successful. I believed in America Online when we built it; I believed in AOL Time Warner when we created it; and I continue to believe in the great potential of this company and its people. While my role will change, my enthusiasm for what this company can accomplish won't diminish."
AOL bought Time Warner for $124 billion in January 2001, and the stock of the combined company has fallen 68 percent since then, in large part a result of falling advertising revenue at the America Online unit.
America Online's 4,700 area employees yesterday had difficulty envisioning the Internet unit without Mr. Case, a local hero with a stellar reputation who helped build the world's most successful Internet company. AOL's success also influenced the growth of the region's technology industry.
"The mood is one of sadness. He was the founder of the company and a source of inspiration for a lot of people. There's the sense that an era has come to an end," said an AOL employee who asked not to be identified.
Mr. Case's resignation as chairman, effective in May, isn't expected to have any effect on the Internet unit, the employee said.
But his decision to step down did affect the company's stock. Shares of AOL Time Warner climbed 15 cents, or 1 percent, yesterday on the New York Stock Exchange, closing at $15.03.
That seemed to lend credence to investors' arguments that AOL Time Warner may be better off without Mr. Case, because he is a lightning rod for critics of AOL's purchase of Time Warner.
"We do not find this announcement overly surprising, given the dissension within and outside the company, particularly by influential shareholders," Merrill Lynch analyst Jessica Reif Cohen wrote in a note to investors. "On balance, we view this announcement as a positive for investor sentiment."
Ted Turner, a vocal and influential critic of Mr. Case, said he was pleased that he decided to step down.
"I admire Steve Case's decision to put our company and its employees first, and am delighted that he will remain on the board and be active because, frankly, we really need his experience and vision," Mr. Turner said.
Mr. Turner is the largest individual investor in AOL Time Warner, with 132.5 million shares, or 3.1 percent of the company. He became an opponent of Mr. Case after disclosure that America Online overstated revenue by $190 million over two years.
Gordon Crawford, a money manager at Capital Research and Management Co., the largest institutional shareholder in AOL Time Warner, with 7.6 percent of the company's shares, also was critical of Mr. Case. A spokeswoman at the investment firm said yesterday Mr. Crawford would not comment.
Youssef Squali, a technology-industry analyst at investment banking firm First Albany Corp., said AOL Time Warner Chief Executive Richard Parsons is Mr. Case's likely successor. But the company directors have several months to make the decision, because the annual meeting is scheduled for May.
Mr. Parsons joined Time Warner in 1995 and assumed the job of AOL Time Warner CEO after Gerald Levin left in May.
Mr. Turner could also emerge as a candidate.
Miss Cohen said Mr. Case's departure could open the door for a top manager from outside AOL Time Warner, and she mentioned Viacom Inc. President and Chief Operating Officer Mel Karmazin as a potential candidate for chief executive if Mr. Parsons takes over as chairman.
While investor sentiment was matter-of-fact about Mr. Case's decision to leave the company, America Online employees reacted to the news with a mixture of shock and surprise.
"It was not unexpected, but I think the timing caught people by surprise," said an AOL employee.
Few employees ventured outside the gated areas of the AOL campus yesterday. At the Dulles Branch Post Office, one America Online worker said Mr. Case's announcement caused anxiety among the workers.
"A lot of people are worrying about their jobs and what will happen next to the company, because Mr. Case was such an integral part of AOL," said the employee, who asked not to be named. "It's definitely quieter today around the campus than normal."
Mr. Case, who doesn't have as much interaction with workers at the AOL campus since the two companies joined, spent the day in meetings at the corporate headquarters in New York.
Marguerite Higgins contributed to this report.

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